Islamic Finance

The author, in discussing production factors and how they are classified, refers to Islamic law in relating certain factors of production which others economists do not relate. A two-factor division of inputs by which they are classified as labor and as capital is judged by the author to be consistent with Islamic jurisprudence. Critical analyses of the economic theory on production factors and of the economic theory on the distribution of the production factors are engaged in by the author.

Some financial practices that do conform to the shari`a are and are thus Islamic are: 1.

Islamic banking is a piece of a larger whole – Islamic morality. Islamic banking is commonly treated as traditional banking with the exclusion of riba. This misconception can lead to non Shari‘a compliant investments and activities.

The author, at the University of London, relates that

Muslims who debate interest-free banking try to take an apologetic approach and try to justify Islamic banking using western economic standards. That is, many Muslims aim to make interest-free banking feasible in western eyes and economically superior by capitalist standards. This approach is incorrect in two ways. First, it misleadingly implies that interest-free banking is mostly all there is to Islamic economics, and thus presents Islamic banking as only another alternative to conventional banking.

Although the Islamic economic system is not opposed to a free market, it does impose certain ethical restrictions on it. This is exemplified by the prohibition of interest and other measures that discourage profiteering. These restrictions should not affect the disposition of people to further the economy because they cannot maximize their profit, since their intentions should be guided by the will to attain Falah and not solely profits.

The author presents an argument that Islamic economics ought to be viewed by Muslim scholars, by

The article, primarily interested in microeconomic theory and formulation, seeks to illustrate the factors that go into the consideration of a Muslim when making his or her investment choices.

The principal aims in Islamic economic interactions are the improvement of the total community, harmony within the society, and good relations between the members of the community and Allah. All things belong to Allah, and justice is an element of the economic and social systems. Interest is forbidden, in order to increase the level of justice in financial transactions. Risk ought to be shared between both parties in a venture, since risk is inherent in all businesses. By the concept of

Shirkah is a partnership in which two or more individuals combine capital, labor, or good credit standing in order to share profits and take on losses together. Various forms of shirka include: