Towards an Interest-Free Islamic Economic System By Waqar Mosood Khan The Islamic Foundation, U.K. and The International Association for Islamic Economics, Islamabad, 1985, 126 p.

Abstract

The author, who is chief economist at the Banker's Equity Limited, an
interest-free institution in Pakistan, earned his Ph.D. in 1983 from Boston
University. This book, a revised version of his doctoral dissertation accepted
at that university, is the first publication sponsored by the International Association
for Islamic Economics in collaboration with the Islamic Foundation.
The study contains important lessons for both interest-bearing and the
interest-free Islamic societies. Theoreticians and practitioners in finance can
equally benefit from this timely publication. It is therefore a very useful addition
to the literature in Islamic economics and in the "signalling theory"
in finance, which are both new and fast growing areas of study.
Traditional banking is on the brink of crisis at present. The banks are failing
at a post-depression record rate in the United States. Experts agree that
a single event such as inability of the developing nations to service their debt,
a steep fall in oil prices, withdrawal of petrodollars from the traditional institutions,
or a significant rise in the interest rates, can lead to hture widespread
failures of banking institutions. Traditional bankers in search of alternatives
such as Islamic banking can benefit from Dr. Khan's rigorous cost benefit
analysis.
Muslim societies interested in Islamization can recognize some of the difficulties
pointed out by the author, especially the information or disclosure
costs associated with interest-free financing. Material incentives, which frequently
exceed the moral teachugs of Islam in contempomy Muslim societies,
may lead to dishonesty in reporting the costs and benefits of business projects
among the concerned parties.
Chapter one outlines the objectives and organization of the study. Readers
are informed that the origin of the principles of Islamic economics lies in ...