An Interview with Professor Salim Rashid, Professor Emeritus, University of Illinois Urbana-Champaign
Emeritus Professor Salim Rashid of the University of Illinois Urbana-Champaign has published widely in the fields of the history of economic thoughts, economic development, mathematical economics, monetary economics, Islamic economics, religion and economics, and economic methodology.
This is the third part of the four-part interview. In this part of the interview, Prof Rashid answers questions on Islamic economics.
Let’s change our focus to a different topic. You have written several papers on Islamic economics. One branch of Islamic economics that is proliferating is Islamic banking. The latest research, however, casts doubt whether Islamic banks are “truly” Islamic in their operations. What is your thought on this?
I do not know what you meant by true Islamic banking. Let me simplify the question by saying, to me Islamic banking means profit and loss sharing. Given the proven excess of equity returns over treasury bills, I am flabbergasted that virtually none of the Islamic banks have been willing to take the risk of engaging solely in profit and loss sharing.
Since profit and loss sharing is proven to be more profitable over time, by far, let’s take a gamble and say okay we take a loss in one year, we take a loss in two years, but we can more than make it up in ten years.
Instead they seem to have opted for a scenario in which they always try calculating the interest equivalent of any profit and loss sharing. This is rewriting interest-based banking in Arabic. It serves no useful purpose.
There is also a considerable confusion regarding the ban of interest rates in Islamic banking. What would you say to readers who are confused like me about the position of interest rate in Islamic economics?
The riba which is banned, and whose meaning is clearly known, has no counterpart in modern banking. Hence taking bank interest is not a matter of conscience, but of one’s own sensitivity.
Can you elaborate on that?
What will be decisive on this issue is a written riba contract specifying exactly what the legal implications are. Without such documents, we are left guessing. Dr MO Farooq, a Bangladeshi economist in the Middle East, has done significant research on this question.
You recently gave a keynote talk at a conference in Bosnia, where you discussed an economic interpretation of Sura Quraysh. Tell us a little about it.
What is called the invisible hand in economics is a reference to the fact that we are often the unintentional agents of God. We are told in Sura Quraysh that the tribe of Quraysh were prosperous because Allah had caused the caravans of merchants to go back and forth to the Kaaba.
Since the merchants were only thinking of their own profits while on these commercial ventures, this is a clear indication that we can be carrying out God’s plan even when we believe we are only pursuing our own self-interest.
It is proper to claim that the first application of ‘invisible hand’ arguments to economics is perhaps in the Quran.
Syed Basher is Professor of Economics at East West University. He can be reached via [email protected]