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Islamic Finance: An Equitable and Efficient Option

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Abstract
Islamic finance starts from one basic concept that is to avoid trading directly present for future money. Finance is provided in the form of money in return for either equity or rights to share proportionately in future business profits. It is also provided in the form of goods and services delivered in return for commitment to repay their value at a future date. This is an obvious option in addition to the conventional practices of interest-based finance. This paper addresses itself to four questions: (1) Why all the fuss about the rate of interest? (2) Is Islamic finance, as an alternative to interest based debt finance viable and efficient? (3) What Islamic finance implies for the whole economy? (4) Given that Islamic finance is really viable, why it has not been adopted at a larger scale?

Suggested Citation

  • Al-Jarhi, Mabid, 2004. "Islamic Finance: An Equitable and Efficient Option," MPRA Paper 55765, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:55765
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    References listed on IDEAS

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    1. Al-Jarhi, Mabid, 1980. "A Monetary and Financial Structure for an Interest-Free Economy: Institutions, Mechanism & Policy," MPRA Paper 66741, University Library of Munich, Germany, revised 2004.
    2. Aggarwal, Rajesh K & Yousef, Tarik, 2000. "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 93-120, February.
    3. Ahmad, Ausaf & Khan, Tariqullah & Iqbal, Munawar, 1998. "Challenges Facing Islamic Banking (Occasional Paper)," Occasional Papers 1998, The Islamic Research and Teaching Institute (IRTI).
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    7. Khan, Tariqullah & Ahmed, Habib, 2001. "Risk Management: An Analysis of Issues in Islamic Financial Industry (Occasional Papers)," Occasional Papers 91, The Islamic Research and Teaching Institute (IRTI).
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    10. Paul S. Mills & John R. Presley, 1999. "Islamic Finance: Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28847-8, March.
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    Cited by:

    1. Al-Jarhi, Mabid, 2009. "Institutional Tawarruq: a Products of Ill Repute in Islamic Finance," MPRA Paper 67811, University Library of Munich, Germany, revised 06 Jun 2009.
    2. Al-Jarhi, Mabid, 2017. "Islamic Finance at Crossroads," MPRA Paper 88555, University Library of Munich, Germany, revised Aug 2018.

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    More about this item

    Keywords

    Islamic finance;

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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