Investment Decision Making, Time Value of Money and Discounting in an Islamic Economy صنع القرار الاستثماري والقيمة الزمنية للنقود والخصم في الاقتصاد الإسلامي

Zarqa (2017) claims to answer briefly the basic questions “how an Islamic zero-interest? rate economy allocates real and financial investments”. Questions addressed include: 1) What is the meaning and scope of the zero-interest imperative? 2) Wouldn’t zero-interest regime deprive an economy of the price signals essential for efficient market allocation of real and financial investment, hence require central planning to maintain efficiency? Zarqa’s paper starts with the phrase that “Our focus is on a zero‑interest‑rate economy (ZIRE)”. It was more than 30 years ago that we used to talk about zero interest-rate economy instead of Islamic economy, just in the interest to make our argument scientific and appealing to economists. But it was soon realized that zero interest economy is a fiction and not a real economy and it is definitely not an Islamic economy and that analysis under the assumption of zero-interest-rate cannot be considered to yield results that could be applied to an Islamic economy. --