Characteristics of money in Islamic law

The IDRAK Director has completed a draft paper on ‘Some Characteristics of Money in English and Islamic law.’ An abstract follows:

In the common law interest is a function of the time value of money. Loan interest compensates creditors for loss of money’s use; opportunity cost, in economic terms. Islamic law prohibits interest. It is widely believed the principle backing the ban of ‘usury’ (ribā’ – ribāwī is the adjectival form) is based in the condemnation of commoditising money, and of ascribing to it a time value. This article demonstrates that these are not the operative principles. The article claims that the principle backing the usury ban — as well as certain commodity exchanges deemed ribāwī — is an overriding imperative: reducing the risks individuals incur by acting on incomplete information and predictably biased beliefs. The article concludes (with a glance to behavioural economics) that the Islamic legal analysis of money has several implications that can beneficially inform economic actors and agents — whether or not they regard Islamic law as authoritative.

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