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Interest and the Modern Economy
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Abstract
The argument that modern economies cannot function without interest is examined in detail. We show that Islamic alternatives to interest, which vary with the context and the type of loan, provide adequate substitutes. Interest based institutions lead to many types of difficulties both practical and theoretical. Islamic alternatives provide solutions to these difficulties.interest; riba; Islamic economics; prohibition of interest; profit sharing; Ricardian equivalence; Modigliani Miller Theorem