"Interest" and the Paradox of Contemporary Islamic Law and Finance

Abstract

In Sections 1 and 2, the article shall provide a brief introduction to various notions of Islamic law as they exist today, as well as the common-law nature of Islamic jurisprudence to establish the possibility of finding a compromise that renders minor modifications of the existing juristic positions coherent. In Sections 3 and 4, the article will provide translations of the entire Azhar Islamic Research Institute (IRI) fatwa, and large excerpts from the Council of the Islamic Jurisprudence Academy's (IJA) rebuttal together with discussions of the juristic backgrounds of each opinion. In Section 5, the author will discuss the ideological roots of contemporary Islamic finance, which continue to shape Muslim views, both for jurists and lay people, regarding interest and permissible profit. In Section 6, the author will provide a brief survey of the most prominent Islamic financial instruments, illustrating the incoherence of juristic views that denounce “interest” and yet maintain that Islamic finance is “interest-free.” Lastly, the author will conclude by proposing a possible compromise between the two extreme views espoused by the IRI fatwa and the IJA rebuttal, which would allow for a coherent juristic and financial nexus in Islamic finance.