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Sale-based debt instruments

In: Religion and Finance

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Abstract

Partnerships and equity-type financing is recommended by all three religions, but in practice debt financing has proved to be irresistible in Judaism, Christianity and Islam despite the strong prohibitions against usury. This chapter explores the various debt-based financial instruments approved by each religion, especially Islam, since Judaism has developed ways around interest-based instruments, while Christianity had eventually abandoned the prohibition against interest early in the nineteenth century. Another aim of this chapter is to examine how Christian and Muslim governments, having in the past used interest-free debt techniques to finance budget deficits, were led towards interest-based instruments. In particular, the first public debt issue in the United Kingdom in 1694 unleashed a golden period of public debt financing that shows no signs of ending. This leads to a broad-ranging analysis, drawing on the research of Reinhart and Rogoff, of how government debt can be reduced, along with an examination of the principles and precedents set by the Prophet Muhammad for Muslims.

Suggested Citation

  • ., 2019. "Sale-based debt instruments," Chapters, in: Religion and Finance, chapter 8, pages 167-192, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:14654_8
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    Cited by:

    1. Ruhrort, Lisa & Zehl, Franziska & Knie, Andreas, 2021. "Untersuchung von Einstellungen gegenüber einer Neuaufteilung öffentlicher Räume zulasten des Autoverkehrs: Ergebnisse einer repräsentativen Befragung im Berliner Bezirk Friedrichshain-Kreuzberg sowie ," Discussion Papers, Research Group Digital Mobility and Social Differentiation SP III 2021-602, WZB Berlin Social Science Center.

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