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Islamic Economics: The Emergence of a New Paradigm


  • Presley, John R
  • Sessions, John G


The authors illustrate the potential impact of the Islamic doctrine on Western economic relationships by focusing on the prohibition of interest (riba) in Islamic economics. They show that the alternate method of financier remuneration (i.e., mudarabah profit-and-loss sharing) will, under certain conditions, enhance capital investment on account of its ability to act as an efficient revelation device. By applying ideas developed in the Western contract literature, the authors show that a mudarabah contract between the manager of a project and a syndicate of investors may permit a more efficient revelation of any informational asymmetries between the two. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Presley, John R & Sessions, John G, 1994. "Islamic Economics: The Emergence of a New Paradigm," Economic Journal, Royal Economic Society, vol. 104(424), pages 584-596, May.
  • Handle: RePEc:ecj:econjl:v:104:y:1994:i:424:p:584-96

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    Cited by:

    1. Khan, Feisal, 2010. "How 'Islamic' is Islamic Banking?," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 805-820, December.
    2. Lucia Dalla Pellegrina, 2007. "Capital Adequacy Ratios, Efficiency and Governance: a Comparison Between Islamic and Western Banks," Working Papers 20070402, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica, revised Apr 2007.
    3. Fatmasari, Dewi Fatmasari & Munawar Albadri, Abdul Aziz & Damayanti, Sisca Damayanti & Harjadi, Dikdik Harjadi, 2018. "Efektivitas Peran Manajer Dalam Mengelolapembiayaan Mudharabah Pada Bank Danamon Syariah Cabang Cirebon [The Effectiveness Of Manager'S Role In Managing Mudharabah Financing In Bank Danamon Syariah," MPRA Paper 99714, University Library of Munich, Germany, revised 01 Jul 2018.
    4. Hearn, Bruce & Piesse, Jenifer & Strange, Roger, 2011. "The role of the stock market in the provision of Islamic development finance: Evidence from Sudan," Emerging Markets Review, Elsevier, vol. 12(4), pages 338-353.
    5. Istvan Egresi & Rauf Belge, 2015. "Development Of Islamic Banking In Turkey," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 5-20, December.
    6. Martha A. Starr & Rasim Yilmaz, 2007. "Bank Runs in Emerging-Market Economies: Evidence from Turkey's Special Finance Houses," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 1112-1132, April.
    7. Mohammad Al-Suhaibani & Nader Naifar, 2014. "Islamic Corporate Governance: Risk-Sharing and Islamic Preferred Shares," Journal of Business Ethics, Springer, vol. 124(4), pages 623-632, November.
    8. Rasem N. Kayed, 2012. "The entrepreneurial role of profit-and-loss sharing modes of finance: theory and practice," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 5(3), pages 203-228, August.
    9. Czerniak, Adam, 2010. "Symptomy kryzysu globalnego a etyka gospodarcza religii światowych. Analiza porównawcza bankowości islamskiej i bankowości klasycznej w kontekście kryzysu finansowego [The differences between the c," MPRA Paper 26971, University Library of Munich, Germany.
    10. repec:ipg:wpaper:2014-093 is not listed on IDEAS
    11. Onour, Ibrahim & Abdalla, Abdelgadir, 2010. "Scale and Technical Efficiency of Islamic Banks in Sudan: Data Envelopment Analysis," MPRA Paper 29885, University Library of Munich, Germany.
    12. Peter A. Cornelisse & Wouter Steffelaar, 1995. "Islamic Banking in Practice: the Case of Pakistan," Development and Change, International Institute of Social Studies, vol. 26(4), pages 687-699, October.
    13. Hearn, Bruce & Piesse, Jenifer & Strange, Roger, 2012. "Islamic finance and market segmentation: Implications for the cost of capital," International Business Review, Elsevier, vol. 21(1), pages 102-113.
    14. Jean Yves MOISSERON & Bruno Laurent MOSCHETTO & Frédéric TEULON, 2014. "Islamic finance: a review of the literature," Working Papers 2014-93, Department of Research, Ipag Business School.
    15. Khan, Tariqullah, 2000. "Islamic Quasi Equity (Debt) Instruments And The Challenges Of Balance Sheet Hedging: An Exploratory Analysis," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 7, pages 1-31.

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