A Post‐Keynesian perspective on Islamic prohibition of Gharar
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 23 August 2013
Abstract
Purpose
This paper aims to draw the wisdom of the prohibition of Gharar through the lens of institutional and Post‐Keynesian economics.
Design/methodology/approach
This research applies the theoretical contributions of the Post‐Keynesian economics and the new institutional economics to clarify the dimensions of Islamic Gharar. This research attempts to see the divergence between theory and practice, looking at empirical data including the information from an interview with one of Indonesian Islamic banks.
Findings
The lens of institutional and Post‐Keynesian economics is useful to clarify two dimensions of Gharar; incompleteness of contracting and fundamental uncertainty associated with business. As for the latter dimension of Gharar, the tradition of Post‐Keynesian economics can distinguish “animal spirit in speculation” and “animal spirit in enterprise”, the latter of which should be carefully considered. However, the interview reveals a kind of difficulty for Islamic financial institutions to tackle “Murabaha syndrome”.
Research limitations/implications
This research supports an opinion such that Islamic financial institutions are not necessarily discouraged to share the associated uncertainty with the small‐sized firms in the agricultural and industrial sector, so far as their “enterprise” is based on the Islamic business ethics.
Originality/value
Despite very significant discussions in the literature on the prohibition of Gharar as a fundamental principle of Islamic finance, less has been done to elaborate upon it through the lens of Post‐Keynesian economics which have greatly contributed to shedding analytical lights on “uncertainty”.
Keywords
Citation
Suzuki, Y. (2013), "A Post‐Keynesian perspective on Islamic prohibition of
Publisher
:Emerald Group Publishing Limited
Copyright © 2013, Emerald Group Publishing Limited