Advancing Well-Being With Interest-Free Finance

Authors

  • Abdul Karim Abdullah International Institute of Advanced Islamic Studies (IAIS) Malaysia

DOI:

https://doi.org/10.52282/icr.v6i4.302

Abstract

This paper argues that utilising risk sharing in preference to interest-based financing would bring a broad range of economic benefits to both individuals and society. The main reason is that equity financing, whether in its conventional or Islamic form, allocates resources more efficiently than loan financing. To show this, the paper compares equity markets with credit markets with a view to efficiency. The prime reason why equity markets allocate resources better than credit markets is that profit as an incentive for driving economic activity is far better suited for allocating resources efficiently than interest. The paper concludes with a number of policy recommendations.

 

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Published

2015-10-15

How to Cite

Abdullah, Abdul Karim. 2015. “Advancing Well-Being With Interest-Free Finance”. ICR Journal 6 (4):551-65. https://doi.org/10.52282/icr.v6i4.302.