Profit and loss sharing: an economic analysis of an Islamic financial system (Ph.D. Dissertation)

This thesis focuses on the subject of profit and loss sharing (PLS) as an alternative to interest or riba. After providing a definition as given in the Qur'an of Riba, the author goes into an in-depth discussion of PLS. as a financial instrument. He defines the contract as one in which no ownership rights exist and the borrower has no discretion in determining a profit distribution policy once the contract is established. The author then discusses the political economy of the Islamic system, the alternative institutional frameworks for PLS and the ethical underpinnings of related economic issues: indexation, capital gains, speculation, reserve banking, and nationalized banking. Then the feasibility of a banking system based entirely on PLS and the workings of the market for loan funds are discussed. Finally, PLS as an alternative tenure arrangement to renting and sharecropping, and a review of some evidence on the implementation of PLS in various countries is presented. The upsho