Prohibition Of Interest Research Articles

The Economic System in Contemporary Islamic Thought: Interpretation and Assessment

Since the late 1940s, and especially since the mid-1960s, a wealth of pamphlets, articles, and books have appeared that constitute the corpus of what is now known as “Islamic economics.” This literature, whose exponents call themselves “Islamic economists,” purports to provide the blueprint of an economic system consonant with the original sources of Islam. The central feature of the proposed system is that individuals are guided in their economic decisions by a set of behavior norms, ostensibly derived from the Qur'an and the Sunna. Two other features stand out:zakāt, a tax considered the basis of Islamic fiscal policy, and the prohibition of interest, viewed as the centerpiece of Islamic monetary policy. Virtually all Islamic economists consider this trio—the norms, zakāt, and zero interest—the pillars of the Islamic system.’

Commentary On the Decision of the Supreme Court of Egypt Given On 4 May 1985 Concerning the Legitimacy of Interest and the Constitutionality of Article 226 of the New Egyptian Civil Code of 1948

long-awaited ruling of the Constitutional Court of Egypt on interest has been issued in a test case brought before that Court by the Rector of the Azhar University. His Eminence the Appellant challenged the constituiionality of Ariicle 226 of the new Egyptian Civil Code for being contrary to the absolute interdiction of interest in the Shanta. lower court, by application of that Article, had ordered the Azhar University to pay the principal of a claim amounting to 592 Egyptian pounds plus interest at the rate of 4 per cent up iill the date of payment. However small the amount of money involved in the case, the decision of the Supreme Court of Egypt constitutes a landmark in the ideological controversy going on between liberal and fundamentalist Muslims. latter deny the validity of all secular legislation adopted by the Ottoman Empire) Egypt) Lebanon) Syria, Libya and Iraq during the last 100 years. interdiciion of interest in Islaniic law has been a subject of controversy since the beginning of Islam some 1,400 years ago. Is the Qur'anic prohibition absolute? Does it cover all forms of interest, or does it distinguish between moderate interest and usury? clash of opinions started shortly after the death of the Prophet, and will continue after the decision of the Supreme Court of Egypt. That decision reserved the queston of the legiiimacy or illegitimacy of interest and based its findings on a matter of dates. Its ruling rests on the principle of non-retro-activity of laws expressed in Article 2 of the Napoleonic Code and implicit irl the new Egyptian Civil Code: La loi ne dtspose que pour l'avenir9 (Law provides only for the future). Before the Supreme Court, counsel for the Plainiiff argued that Article 2 of the Egypiian Consiituiion was amended on 22 May 1980 to read in part as follows: The principles of the Shari'a are the main source of legislation in the Arab Republic of Egypt . While they differed among themselves in some pareculars, the Shanta jurists were practically unanimous in condemning interest in whatever form and at whatever rate. To quote Al-Moghni by the classical Hanbali jurist Ibn Kodama (Vol. IV of Lhe Beirut ediiion) at page 122: Riba (interest) is prohibited by the Book (the Qur'an), jche Sunna (the Tradition of the Prophet) and the consensus of the Muslim community. According to the Plainiiff, the amended text of the Constituiion implicitly repealed Ariicle 226 of the Egypiian Civil Code and replaced it by the ruling of ffie Shuri'a on the prohibition of interest That article of the new Code provides as follows:

The microeconomics of deposit rate ceilings: Inferences for NOW accounts and interest on checking accounts

This paper examines the specific set of market and product conditions which could support the theoretical argument, widely held among commercial bankers, that deposit rate ceilings, especially the prohibition of interest on checking accounts, are beneficial to bank earnings. The analysis points to the conclusion that ceilings are beneficial to bankers only if (a) bank deposits are homogeneous goods, (b) deposit markets are non-collusive oligopsonies, and (c) the regulated ceiling rate is not set too far below the ceiling that would exist in an unregulated monopsony. Empirical studies done elsewhere seem to indicate that none of these three necessary conditions are normally met in the marketplace. The NOW account, which is really an interest-bearing checking account, also extends demand deposit powers to non-bank thrift institutions. Under our analysis, the NOW account adds to the number of competitors offering checking-type deposits, driving up the cost of funds, other things equal, to the oligopsonist banker — perhaps by enough to offset the cost-reducing effect of repeal of the interest prohibition.

DEPOSIT INTEREST PROHIBITION, TRANSACTIONS COSTS, AND PAYMENTS PATTERNS: A THEORETICAL ANALYSIS

MetroeconomicaVolume 26, Issue 1-3 p. 144-152 DEPOSIT INTEREST PROHIBITION, TRANSACTIONS COSTS, AND PAYMENTS PATTERNS: A THEORETICAL ANALYSIS Michael A. Klein, Michael A. Klein The author is Associate Professor of Economics at Indiana University.Search for more papers by this author Michael A. Klein, Michael A. Klein The author is Associate Professor of Economics at Indiana University.Search for more papers by this author First published: February 1974 https://doi.org/10.1111/j.1467-999X.1974.tb00341.xCitations: 2 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume26, Issue1-3February 1974Pages 144-152 RelatedInformation

The Structure of the Postwar Money Market

An interesting financial development of recent years is the renewal of activity in the money market. Transactions follow a quite different pattern from that of the 1920's, to which one must turn for a comparably active period. There have been important changes in the mechanics of money market operations, traceable to fundamental shifts in business and government finance. A survey of the functioning of the money market under present-day conditions affords an opportunity to examine the economic purpose served by this portion of the financial apparatus. Briefly, government securities have largely displaced other types of open nlarket paper. Commercial banks have come to rely heavily on purchases and sales of government securities to adjust their reserve positions. The long standing tie between the money market and the stock market has been almost severed. The Federal Reserve System has become an integral part of the market. Very large amounts of funds move in and out of the money market, yet fluctuations in money rates are of very small magnitude. Over the past 20 years the entire structure has undergone substantial modifications. The United States money market, which has always centered in New York, did not reach a stage of development comparable to that of the London money market until the second decade of the present century. Although the Federal Reserve System had been created in part to release the banking system from its close ties with the stock market, the money market in the 1920's was dominated by brokers' loans. Other segments of the money market, namely those concerned with the government's floating debt, bankers' acceptances, and open market commercial paper, were overshadowed by the call money market. Although commercial banks continue to supply brokers with $500-1,000 million of funds, they do not rely on brokers' paper as a marginal outlet for surplus funds. Consequently, the call loan rate has ceased to be a significant index of the condition of the money market. The shift from brokers' loans to government securities took place as a result of the great depression and of war finance. In the aftermath of the 1929 stock market crash brokers' loans declined to one-twentieth of their boom level. The imposition of a series of government controls, particularly margin regulation, prohibition of interest on interbank deposits, and barring of loans by others, contributed to the shrinkage by restricting both demand and supply factors. The falling off of international trade and the tendency for a large portion of what remained to be conducted without financing through the money market drastically reduced the volume of bankers' acceptances. The low level of domestic industrial activity was reflected in a sharp reduction in volume of open market commercial paper. Although business activity has reached very high levels in recent years, there has