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Interest Free Financing and Banking
In this section, there are two instances where the author creates confusion. The first instance is when he uses inaccurate definitions, and the second instance occurs when he draws a wrong policy conclusion. He uses the expressions "unearned income" and "fixed rent" in an incorrect context (p. 119). His discussion leaves one with the impression that these two sources of income are completely forbidden in Islam, which is far from the truth. Another instance where he draws a judgmental policy conclusion is when he recommends nationalization of banks on the basis of an undefined, theoretical concept of "social profitability." We find no support from economic theory or the experience of the developing or socialist world to indicate that nationalized banks contribute to social profitability. Instead, banks in the public sector are often found to be economically inefficient, bureaucratic, unresponsive to public needs, and an embodiment of waste and misallocation of economic resources.
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