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Interest and the Modern Economy


  • Zaman, Arshad
  • Zaman, Asad


The argument that modern economies cannot function without interest is examined in detail. We show that Islamic alternatives to interest, which vary with the context and the type of loan, provide adequate substitutes. Interest based institutions lead to many types of difficulties both practical and theoretical. Islamic alternatives provide solutions to these difficulties.

Suggested Citation

  • Zaman, Arshad & Zaman, Asad, 2000. "Interest and the Modern Economy," MPRA Paper 9944, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9944

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    References listed on IDEAS

    1. Satya R. Chakravarty, 2003. "A Generalized Human Development Index," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 99-114, February.
    2. Martin Ravallion, 2012. "Mashup Indices of Development," World Bank Research Observer, World Bank Group, vol. 27(1), pages 1-32, February.
    3. Mozaffar Qizilbash, 1996. "Capabilities, well-being and human development: A survey," Journal of Development Studies, Taylor & Francis Journals, vol. 33(2), pages 143-162.
    4. 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.
    5. 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.
    6. 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.
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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.

    More about this item


    interest; riba; Islamic economics; prohibition of interest; profit sharing; Ricardian equivalence; Modigliani Miller Theorem;

    JEL classification:

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


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