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Islam and «Scientific» Economics

In the Pursuit of a New Paradigm

Hasan Gürak

In an Islamic society, it is ethics that dominates and determines all behavior, including economic behavior. The Holy Koran emerges as the main source of all economic behavior and practices which are subject to the commands of Allah as stated in the Koran. Since Islam is a universal religion, the Islamic economic paradigm with its «scientific» Islamic economic theories has to be comprehensive as well as perfect in the sense of fairness, ethical values and fruitfulness. A universal Islamic economic system ought to have universally applicable economic laws acceptable by both, the Muslim and the non-Muslim world – meaning that when the word Islamic is taken out of the equation; it should appeal to all societies and countries equally, regardless of their religious persuasion. The question now is; do Islamic economics offer such «scientific» economic theories? Surprisingly, there were no such theories at all. In fact, there was not even a theory of interest, the most frequently referred to subject in Islamic economics. This appeared to be a serious omission. The Holy sources may be more than sufficient for Muslims, but what about non-Muslims? Isn’t it justified to expect Islamic «scientific» economic models and theories that are applicable to or able to guide non-Muslims?
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Chapter-6 Islam & Interest From the perspective of an economist

← 136 | 137 → Chapter-6


The concept “interest” or “riba” for some has been one of the most vehemently debated subjects in economics; probably “the” most vehemently debated one. The notion of interest and its implications were known long before the advent of Islam. Babylon had developed a loan system in the second Millennium BC, as early as 1760 BC, where some restrictions on interest payment were imposed by the code of Hammurabi, a code of Babylonian law named after its author.

“The Code of Hammurabi indicates a 20-percent interest rate on money and grain, and it stipulates that a merchant charging a higher rate would forfeit the amount lent. By contrast God’s law to Israel prohibited making loans on interest to needy fellow Israelites.” (http-16).

In spite of all the criticism, the payment of interest has been practiced in various forms all around the world, even in Muslim countries. Today, it is a common and routine practice in the non-Muslim world. Though getting interest is not permitted in the religion of Islam, Muslims are not unfamiliar with the system. For example, oil income rich Muslim rulers and their close associates keep their financial assets worth billions of US Dollars in the Western financial system. Nobody is naive enough to believe that they do not get any interest on these assets.

On the one hand, there is the Islamic rule forbidding interest payment, and on the other, the Western economic system which considers the payment of interest as a...

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