Islam proposes that the banking systems that operate on the basis of an ex ante fixed rate of interest to replaced by a profit-sharing system in which the rate of return to the financial resources is not known and is not fixed prior to the undertaking of the transaction.
While in Islam interest is forbidden, trade and profits are permissible and in fact encouraged. The papers in this volume all address one or more of the basic questions at the theoretical level.
They represent a start in the attempt to introduce rigor into the analysis of Islamic banking and finance, thereby clarifying the nature of the basic relationships underlying the system.
About the Authors
Mohsin S. Khan is Assistant Director, Research Department, International Monetary Fund. He was previously on the staff of the World Bank and has taught at the London School of Economics. He received his PhD from the London School of Economics and has published widely in the fields of macroeconomics, money and banking and international economics. Abbas Mirakhor is an economist in the Research Departmnet of the International Monetery Fund. He was formerly Professor of Economics at the Florida Institute of Technology. He received his PhD from Kansas State University, and has published in a variety of areas, including microeconomics theory, mathematical economics, and Islamic Economics.