Theories and Practices of Islamic Finance and Exchange Laws: Poverty of Interest

International Journal of Business and Social Science, Vol. 5, No. 12; November 2014

19 Pages Posted: 17 Jan 2015 Last revised: 11 Dec 2015

See all articles by Ahmed Souaiaia

Ahmed Souaiaia

University of Iowa; University of Washington

Date Written: November 1, 2014

Abstract

While Islamic scriptures clearly prohibit profiting from the poor, supposedly sharī'ah-compliant Islamic financial and exchange laws circumvent prohibitions and limitations on ribā, monopolism, debt, and risk while failing to address the fundamental purpose behind the prohibitions — mitigating poverty. This study provides a historical survey of the principles that shape Islamic finance and exchange laws, reviews classical and modern interpretations and practices in the banking and exchange sectors, and suggests a normative model rooted in the interpretation of Islamic sources of law reconstructed from paradigmatic cases. Financial systems that overlook the nexus between poverty and usury harm both the economy and poor and middle class consumers and investors rather than addressing the causal relationship between interest-charging models and poverty. This study shows how Islamic Financial Institutions (IFIs) have failed to meet the social requirements they were intended to address and also presents a theoretical framework for Islamic finance and exchange laws that proscribes usurious transactions involving people caught in the cycle of poverty and need.

Suggested Citation

Souaiaia, Ahmed, Theories and Practices of Islamic Finance and Exchange Laws: Poverty of Interest (November 1, 2014). International Journal of Business and Social Science, Vol. 5, No. 12; November 2014. Available at SSRN: https://ssrn.com/abstract=2550293

Ahmed Souaiaia (Contact Author)

University of Iowa ( email )

314 Gilmore Hall
Iowa City, IA 52242-1097
United States

University of Washington

Seattle, WA 98195
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
333
Abstract Views
1,192
rank
90,881
PlumX Metrics