JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.We illustrate the potential impact of the Islamic doctrine on western economic relationships by focusing on the prohibition of interest (riba) in Islamic economics. We show that the alternative method of financier remuneration (i.e. mudarabah profit-and-loss sharing) will, under certain conditions, enhance capital investment on account of its ability to act as an efficient revelation device. By applying ideas developed in the western contract literature, we show that a mudarabah contract between the manager of a project and a syndicate of investors may permit a more efficient revelation of any informational asymmetries between the two. * This work has benefited from discussions with Saul Estrin, Hussein Sharif Hussein and Umer Chapra. Helpful comments were also received from two anonymous referees. We should like to express a particular debt of gratitude to Haitham Kabbara for his inspiration and guidance in this area. The usual disclaimer applies.[ 584 ] THE ECONOMIC JOURNAL [MAY II. THE PROHIBITION OF INTEREST THE ECONOMIC JOURNAL [MAY efficiency in production. Since c2 = cl = A(xl) -because (i I b) will obviously bind at the optimum (see Hart and Holmstrom, I987) -the trade-off boils down to the choice of A(xl). It is apparent that A(xl) > A(x*) is not optimal, since, by increasing the gap between c2 and cl, it would imply losses in both productive and allocative efficiency. It must be the case then that A(xl) < A (x*), which implies that (I I a) is not an effective constraint such that x2 = x.We now look at the optimal second best contracts under riba and mudarabah financing in turn. Second Best: RibaThe optimal second best solution under riba financing, fr = {Si, Ii}, is detailed in Appendix Bi. The salient features are summarised in the following proposition:

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This paper assesses the progress towards the intra-regional integration among the GCC countries. We find that although there is limited trade integration in the region as a whole, there are specific countries (for example Bahrain and Oman) that are significantly integrated with at least one trade partner from within the region. The paper argues that the GCC region will have to create a consensus on the trade barriers on the imports from outside the region if progress towards the intra-regional integration is to be increased. Copyright Blackwell Publishers Ltd 2001.

Compares the role of the recently established Training and Enterprise Councils (TECs) with that of the relevant German institutions of support for small and medium‐sized enterprises (SMEs). Examines the adequacy of each as a means of supporting SMEs in the context of overall SME policy. In the summer of 1992 the authors conducted a survey of the TECs in England and an in‐depth investigation of a management consultancy scheme at a particular TEC. The results from this work, along with other research into comparable German schemes, provided an invaluable source of information with which to evaluate the coherence of SME support. Certain problems were found with TEC schemes which were partially attributable to their infancy. The German case offers important lessons but should not be used as an exemplary model for the UK.

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Examines the impact of the oil recession on the viability of past banking business and its implications for the future loan portfolio of the commercial banks. Concludes that there is a need for greater risk management, not only in terms of loan recovery, but also in relation to more effective portfolio management; this embraces a greater emphasis upon the nature of risk and return in bank asset structure and greater diversification of assets in order to spread risks and to reduce bank exposure to particular sectors of the domestic economies.