How has Islamic banking redefined lending to deal with Islam's prohibition of usury?
What will be an ideal response?
Islamic banking has found alternative mechanisms for encouraging the flow of funds from savers to borrowers through banks that pay no interest on deposits, or loans. This provides savers with access to their liquid assets, while capturing the lower transactions costs and risk sharing associated with depository institutions and other financial intermediaries. On the lender side, the bank is entitled to a share of the gains the borrower generates from the loan (e.g., from investing in capital or some other physical asset), or purchases goods on behalf of the borrower. Since the bank benefits from economies of scale, it is able to generate profits by negotiating lower prices (or lower per-unit cost) than an individual could.
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A Comparison of Macroeconomic Views
The firm illustrated above is
A) earning an economic profit of $400,000 per month. B) earning an economic profit of $2,000,000 per month. C) earning an economic profit of $1,600,000 per month. D) incurring an economic loss of $400,000 per month. E) incurring an economic loss of $1,600,000 per month.
Marginal revenue is the change in:
a. total profit brought about by selling one more unit of output. b. price brought about by selling one more unit of output. c. total revenue brought about by selling one more unit of output. d. output brought about by a $1 change in product price. e. average revenue brought about by selling one more unit of output.
If the interest rate is below the equilibrium, which of the following occurs in this market?
a. excess supply b. excess quantity supplied c. excess demand d. excess quantity demanded