Merits and Demerits of Interest-Free Financial System
International Journal of Management Focus, Jan-March, 2014
7 Pages Posted: 9 Aug 2014
Date Written: January 2014
There is a significant and rapid growth of Interest free banking and finance in international economy since last two decades. Interest free banking and finance has flocked momentum to become a milestone on the financial landscape. Noticeable developments in Interest free banking and finance in the past couple of decades can be seen evidently. Muslims are not satisfied with the theory of capitalism and communism finance. They are interested in the theory of Interest free finance. This theory is based on the knowledge and application of the injunctions of Sharia which prevent injustice. Interest free financial system permits return obtained in the form of profit by investment and business activities which actually produce wealth. It also circulates this wealth in the society as widely as possible. The System forbids interest which concentrates wealth in a few hands. The Interest free Banking and Finance was endeavored in early sixties in Egypt. Now it has entered into a significant mode and gained a large amount of popularity throughout the globe in twenty first century with force. Interest free Banking and Finance endures with conventional banking and finance. Interest free banking and finance is currently practiced through two means – firstly, Interest free Banks/Financial Institutions and secondly, Islamic windows offered by some renowned conventional banks. This paper studies critically various pros and cons of Interest free Financial System. Under pros, different features of Interest free Finance are characterized while the cons highlight the drawbacks of the same.
Keywords: Interest free banking and finance, Islamic Sharia, alternate, Global finance
JEL Classification: F42, F33, H87
Suggested Citation: Suggested Citation