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Interest And The Modern Economy

Author

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  • ZAMAN, ARSHAD

    (Lahore University of Management Sciences)

  • ZAMAN, ASAD

    (Lahore University of Management Sciences)

Abstract

As professional economists, we are frequently asked whether the modern economy can function without a market for interest-based credit. This question has acquired some urgency in the wake of the recent Shariat Court ruling on interest in Pakistan. Some pundits have pronounced that great harm will result from the banning of interest.1 Actually, such pronouncements are based on lack of understanding of both the modern economic system, as well as the nature of the Islamic prohibition of interest. As we hope to demonstrate below, the modern economy can function very well, indeed better in some ways,2 with a prohibition on interest rate payments as prescribed in the Shariah.

Suggested Citation

  • Zaman, Arshad & Zaman, Asad, 2001. "Interest And The Modern Economy," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 8, pages 61-74.
    • Handle: RePEc:ris:isecst:0084
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    References listed on IDEAS

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    1. Satya R. Chakravarty, 2003. "A Generalized Human Development Index," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 99-114, February.
    2. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    3. Martin Ravallion, 2012. "Mashup Indices of Development," The World Bank Research Observer, World Bank, vol. 27(1), pages 1-32, February.
    4. Mozaffar Qizilbash, 1996. "Capabilities, well-being and human development: A survey," Journal of Development Studies, Taylor & Francis Journals, vol. 33(2), pages 143-162.
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    6. Nazim Zaman & Mehmet Asutay, 2009. "Divergence Between Aspirations And Realities Of Islamic Economics: A Political Economy Approach To Bridging The Divide," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 17(1), pages 73-96, June.
    7. Amir-Ud-Din, Rafi, 2014. "Maqāṣid al-Sharīʿah: Are We Measuring The Immeasurable?," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 1-32.
    8. Sayyid Tahir, 1995. "Islamic Perspectives on Economic Development," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 34(4), pages 845-856.
    9. Mohsin S. Khan, 1986. "Islamic Interest-Free Banking: A Theoretical Analysis (Le système bancaire islamique: analyse théorique d'un système qui ne fait pas appel à l'intérêt) (La prohibición islámica de los intereses," IMF Staff Papers, Palgrave Macmillan, vol. 33(1), pages 1-27, March.
    10. Mohsin S. Khan & Abbas Mirakhor, 1989. "The Financial System and Monetary Policy in an Islamic Economy النظام المالي والسياسة النقدية في اقتصاد إسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 1(1), pages 39-57, January.
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    Cited by:

    1. Shaikh, Salman, 2012. "Interest Based Financial Intermediation: Analysis and Solutions," MPRA Paper 42500, University Library of Munich, Germany.
    2. Mohammad Aslam & Toseef Azid & Shahnawaz Malik, 2000. "Attitude towards Interest-free Financing among Small Traders and Farmers in Multan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 663-672.

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    JEL classification:

    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other

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