Culture, finance and markets in Saudi Arabia

Explains how the adoption of Islamic law (Shariah) theoretically affects a political economy, why it requires the abolition of interest rates as a price for money and how this is achieved. Takes Saudi Arabia as an example of a Muslim country governed by Shariah and investigates how far it accords with theory. Argues that equity financing (including non‐interest bearing government bonds) has helped to finance growth and insulated the stock market from speculative financing. Looks at statistics on the financial structures, assets and loans of Saudi banks (including joing ventures with foreign banks) and concludes that they have “done well” in implementing Islamic principles; and that interest‐free financing is appropriate for this country.