What is Wrong with Islamic Economics?

What is Wrong with Islamic Economics?

Analysing the Present State and Future Agenda

Studies in Islamic Finance, Accounting and Governance series

Muhammad Akram Khan

What is Wrong with Islamic Economics? takes an objective look at the state of the art in Islamic economics and finance. It analyses reasons for perceived stagnation and also suggests a way forward.

Chapter 10: Theory of riba: the orthodox interpretation

Muhammad Akram Khan

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation, islamic economics and finance, money and banking


The Qur’an declares riba unlawful but does not define it (Q. 2:275–281) because ordinary people in the days of the Prophet were familiar with it. There were professional moneylenders who provided loans on interest. In the case of default, the creditor used to increase the amount payable either at an increased rate of interest or at the previous rate and give an extension in the period for payment. Thus interest payable on loans was equivalent to riba. Orthodox scholars of Islam have argued that riba stands for any excess on the principal sum of loan irrespective of the amount, purpose and duration of the loan. Although several commentators of the Qur’an understood similarly in the past, yet this interpretation of riba was presented to make a case for interest-free banking in the first half of the twentieth century. A large number of prominent scholars such as Mufti Muhammad Shafi (1896–1976), Muhammad Abu Zahra (1898–1974), Abu al-‘Ala Mawdudi (1903–79), Syed Qutb (1906–66), Muhammad Hameedullah (1908–2002), Sheikh Jad al-Haqq Ali Jad al-Haqq (1917–96), Zaki Badawi (1922–2006), Baqir al-Sadr (1935–80), Hifzur Rahman Seoharvi, Sheikh Mahmud Ahmad (1918–90) and Anwar Iqbal Qureshi, to name a few, pleaded for this interpretation. Among the second generation of scholars Khurshid Ahmad, Nejatullah Siddiqi, Taqi Uthmani, Umer Chapra, Monzer Kahf, Anas Zarqa, Fahim Khan and a large number of other scholars have endorsed this interpretation.

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