Many economists have studied the macroeconomic properties of interest-free banking in the framework of an isolated and ideal Islamic economy. In this age of integrated global financial markets, it is important to consider an alternative model where interest-based and interest-free banking...

This paper presents an economic argument that the prohibition of Rib¯a in classical Islamic Jurisprudence can be explained by appealing to precommitment and economic efficiency considerations. Our starting point is an argument provided by ’Ibn Rush¯ d in Bid¯ayat alMujtahid wa Nih¯ayat...