Banking and Islamic Law

Modern economy with its high technological advancement, growth of industrial and commercial organizations, and mounting expenditure in public sector by almost all Governments, has become so enormous that it requires special financial agencies for its running. That is why present banking is not only expanding rapidly but is also becoming more and more specialized and sophisticated. This is as true of muslim countries as of others, but is poses one difficulty for the former. Interest has become an integral element of banking, but it is prohibited in Islam, and the problem is how we can derive benefits of this system till we get rid of interest.

Obviously the Muslim countries cannot just do away with banking on account of the element of interest, because of the vital role which banking plays in development. So the muslim countries face a dilemma: Whether to keep the banking system and thus keep alive the institution of interest also or to dispense with it entirely in order to get rid of interest. Or is there any other solution.?

The problem, though complicated, calls for a solution. If modern banking operations and their ramifications are critically examined, it will be found that interest actually plays rather a sinister role and, so far as the larger interests

Of humanity are concerned, it vitiates the benefits which expansion of economy and development are expected to confer. And, for the matter of that, it hampers economic progress and economic Justice for mankind.

A number of writers have given thought to this grave problem, and suggested measures for interest-free banking But the literature on the subject is still rather scanty, and the details remain very much to be thrashed out for a change over. The matter requires the attention of those experienced and serious bankers who have the interest of humanity at heart and who could make practical suggestions for carrying out the necessary reform.

Although not a practical banker, Dr. Muslehuddin, too, has tried his hand at this issue, and after giving a readable account of banking, has presented his views on the subject in a useful and objective way as to its operations in the light of Islamic law. In the hope that his book will be a valuable addition to the literature and material for thought on interest free baking, we present it to the public in general and to students of economics and law in particular.

The Islamic Research Academy is grateful to Dr. Muslehuddin for giving it the opportunity of publishing this work.

Back of the Book

Interest is prohibited in Islam to avoid exploitation of humanity but it is an integral part of present banking system. That is why it is required to be examined that how banking system works, its impact on the society, why banking is developing very fast, Is present banking system justifiable in the context of the Islamic law and the economic need of the society? And Is it possible, by certain modifications in present banking functions, to establish interest free banking system? Answers of all these questions are given in this book after studying the historical development of banking system and referring the interest free economy Practised in the early days of Islam, economic need of Islamic society which was based on the principle of neither do harm, nor be harmed' and Islamic law according to Qur'an and Ahadeeth, It would be very useful book for the students who has little bit knowledge of economy or wants to know whether interest free banking system is possible or not.