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Constant Mews and Adrian Walsh

deep-rooted and widespread. The Oxford English Dictionary (1989), for example, defines usury as initially ‘the fact or practice of lending money at interest’, but comments that it later means ‘the practice of charging, taking, or contracting to receive, excessive or illegal rates of interest for money on loan’, as well as mentioning its archaic meaning as any premium or interest on a loan. Little wonder we are confused. Any lawyer would observe that this range of meanings makes usury far too slippery a notion to be useful in law, let alone to be an adequate

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Mohamed Ariff

) claim that guaranteeing the principal is also strictly not kosher in Islamic finance, but, in practice, is allowed. In publiclytraded debt contracts this is always the norm, as traded prices of bonds decline if the risk does materialize, leading to losses because of declining bond prices.1 In this sense, modern banking practice of exacting a pre-fixed interest charge in debt contracts, albeit not high enough to reach the legal limit of usury rate, introduces a one-sided contract with no equitable recourse for borrowings at risk. Some claim that this makes the moneyed

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Abdul Azim Islahi

measure of values. It was never desired for itself. But the practice of lending money on interest made the money a source of injustice and exploitation. So strict had been the prohibition of interest in Islam, that the question why interest arises and how its rates are determined, became irrelevant to Muslim scholars. They only tried to visualize its ill effects and exploitative nature (cf. Ibn Taymiyah 1963, Vol. 29, pp. 419, 455; al-Razi, 1938, Vol. 5, p. 92). They were also against making a distinction between interest on a consumption loan and interest on a

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Mervyn K. Lewis

, so that the whole society may benefit. Islam also emphasises the welfare of the community over individual rights. The focus in the Holy Qur’an is on the interests of the entirety of the Muslim society, rather than on the special interest of individual Muslims: And hold fast, all together, by the Rope which Allah (stretches out for you), and not be divided among yourselves. (Al-Imran, 3:103) 3.5 Stewardship of Resources Mankind has been appointed God’s vice-regent on earth and given the sacred duty of the stewardship of all natural and created resources

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Abdul Azim Islahi

elaborately. Elsewhere we have given an account of it (Islahi, 1995, pp. 19–35). In the mainstream economics, analysis of functional distribution has been given more importance. We 32 History of Islamic economic thought shall therefore confine our discussion to Muslim scholars’ perception of functional distribution. 4.2.1 Profit It may be noted that Muslim scholars excluded interest (a rate charged on capital lent against the time given for use) from the list of rewards for factors. Capital has to come in terms with the entrepreneur as equity participant and share in

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History of Islamic Economic Thought

Contributions of Muslim Scholars to Economic Thought and Analysis

Abdul Azim Islahi

This unique book highlights the contributions made by Muslim scholars to economic thought throughout history, a topic that has received relatively little attention in mainstream economics. Abdul Azim Islahi discusses various ways in which Muslim ideas reached the European West, influencing scholars and helping to form the foundations of modern economic ideas and theories.
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Kabir Hassan and Eric Girard

the reserve accumulation (the liquidity ratios for Malaysia are 5 to 6 times greater than those of the USA), Malaysia should be facing inflationary pressures. So far, Malaysia is able to control inflation pressures through administrative controls on interest rates and the exchange rate – the inflation rate (2.3 percent per annum from 2002 to 2006) is lower than the US inflation rate. The newly floating currency will certainly put inflationary pressures on the Malaysian economy. Finally, the Malaysian stock market has cumulated 11.13 percent from 1999 to the end of

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Mervyn K. Lewis and Latifa M. Algaoud

CHAPTER 8 23/05/2001 12:04 pm Page 1 8. Islamic and Christian attitudes to usury THE LESSONS OF HISTORY Islam is the only major religion which maintains a prohibition on usury. Yet, it was not always so. In Ancient India, laws based on the Veda, the oldest scriptures of Hinduism, condemned usury as a major sin and restricted the operation of interest rates (Gopal, 1935; Rangaswami, 1927).1 In Judaism, the Torah (the Hebrew name of the Law of Moses or the Pentateuch, the first five books of the Old Testament) prohibited usury amongst the Jews, while at least

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Mahmoud A. El-Gamal

lease financing (ijara), where the mark-up profit component and the rent component, respectively, are commonly benchmarked to market interest rates. In recent years, sovereign governments in the Islamic world, as well as a number of corporations, have issued Islamic bond alternatives (known by the Arabic name sukuk, or debt certificates) for which the primary buyers are Islamic banks. Rates of return on those sukuk are also benchmarked to the appropriate interest rate, and based on the issuer’s credit rating. Thus Islamic banks have come to replicate the asset structures

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Masudul Alam Choudhury

faire or non-intervention. Marx’s epistemological concept of overdetermination of a social system resulted in an early form of social Darwinism. Walras’s general equilibrium system was premised on an exogenous monetary unit as the numéraire of his general equilibrium system. This caused competition between money and real economy as two opposing sector activities. The result was the inevitable prevalence of the interest rate as the price of money in contradistinction to the price of goods. Even in the ethical theory of moral sentiment, Smith’s precept of natural