ABSTRACT
Journal of Economic Literature
Volume 34, no. 4, December 1996
(An American Economic Association Publication)
by
A.L.M. Abdul Gafoor
Explains how un-Islamic elements could be
removed from current banking practices to create a system that is both viable
and acceptable to Islam. Presents a model of the commercial bank lending
operations in which the "interest" charged by the bank is considered
to consist of six distinct components: interest, cost of services, cost of
overhead, a risk premium, profit, and compensation for inflation. Traces the
role played by interest in the lending operation and demonstrates that it is
possible to remove the interest component from banking without resort to
drastic measures. Presents a complete interest-free commercial banking system
that would be practicable in strictly Muslim countries, nominally Muslim
countries, and countries where there is a Muslim population who wish to avoid
dealing in interest. Traces the history of Islamic banking; discusses current
practices; and offers suggestions for overcoming problems that are being caused
by current Islamic banking practices. Bibliography; index.
Groningen: Apptec Publications ISBN
90-802354-1-5, xii+86 pages, 1995