Economic analysis of interest-free economics (Islamic Banking) (Ph.D. Dissertation)

This thesis discusses the three main choices economic policymakers have regarding their relation to interest: prohibiting it, limiting it through usury laws, or allowing free market forces to regulate it. The writing opens with an historical study focusing on the origins of the prohibition of interest followed by an examination of interest-free banks - banks that share profits/losses with its depositors rather than paying fixed returns. There are not many such banks in existence today, but they are becoming increasingly important in the economic marketplace. The study goes on to develop a 'microeconomic static mathematical probabilistic model,' as the author puts it, to examine bank-depositor relations. Different approaches to risk and risk-sharing are used to analyze the model in order to develop a base theory for banks that avoid interest. The model is further used to show that interest-free banks can be just as successful as their interest-based counterparts, and eventually i