388 chapter nine
The third opinion differentiates between whether the change in the
value of money is superficial or substantial; if superficial the debt is
paid at the same amount originally borrowed regardless of the change
in the value of money, but if substantial it ought to be paid at an
increase to compensate the lender, or the credit provider, for the
loss in the real value of money. How much is substantial is an impor-
tant question the answer to which is left to the custom of the trade
according to the prevailing circumstances. This is a middle of the
road approach, a compromise between the first and second opinions
cited above.
Islamic economists have been contributing to the debate with a view
to answering this vexing problem. Having discussed the various views
of the Medieval jurists, Hassanuzzaman is in favour of indexation
and argues that indexation is not illegitimate under Islamic law
(Hassanuzzaman, 1985). Iqbal is in favour of indexation and suggests
the use of a general price level to which all loans in a country be
linked, with the price level continuously reviewed and announced by
the government (Iqbal, 1987). Mannan argues that where the changes
in the value of money in modern times have become unavoidable,
indexation of loans provides more justice to the lender (Mannan,
1981). Isaa, having discussed the topic at length leans towards the
view of compensating the lender for the loss resulting from the reduc-
tion in the real value of money and suggests an approach to index-
ation based on linking the value of money to an accounting unit the
value of which is derived from the value of a certain amount, one
gramme, of gold (Isaa, 1993). The debate does not seem to be con-
cluded, however, and there are no known cases where Islamic banks
have charged financial compensation to cover the decline in the
value of money.
Economic Development
Economic development is a central and crucial issue for the major-
ity of Islamic economists. This is for two particular reasons, the abo-
lition of interest from the Islamic economy and the effect of Zakàh.
With the abolition of interest there is more focus on the development
of resources and production, and the implications for land, capital
and labour. Zakàh is concerned with the distribution of output
or income and with the consequences for wealth, with a view to
achieving a just allocation of resources. Therefore, by necessity and