Reformed Banking System - Interest Free Banking

Only available on StudyMode
  • Topic: Islamic banking, Sharia, Bank
  • Pages : 13 (3992 words )
  • Download(s) : 598
  • Published : May 5, 2012
Open Document
Text Preview
The Reformed System:
Interest Free Banking
…………………………………..
Dr. Sirajuddin H Chougle,
Dr. Abdul Majid Ansari,
Associate Professors, Department of Commerce, Maharashtra College, Nagpada, Mumbai. 400 008.India
Contact:sirajchougle@gmail.com
………………………………………………………………………………

Abstract
One major problem the world faces today is acute poverty or widening gap between rich and poor.

There have been continuous efforts to tackle this issue. The efforts are made to develop a balanced world. Banks play a vital role in dealing with this problem.

The conventional interest based banking has been partially successful in removing poverty by reducing the gap between the rich and the poor. In this method, there are cases which show that the society at large may seem to be developing but at the same time producing some harmful effects.

Interest free Islamic banking; on the other hand, work on the principles of equality and justice. For example in interest free Islamic banking, interest is considered to be most exploitative, particularly for the poor, therefore prohibited. Similarly the speculation, alcohol and other anti-social business like casino is not permitted to be financed by these banks.

This paper is an attempt to present the role of interest free Islamic banking in reducing the gap between the have and have-nots.

The Reformed System:
Interest Free Banking
…………………………………..
Dr. Sirajuddin H Chougle,
Dr. Abdul Majid Ansari,
Associate Professors, Department of Commerce, Maharashtra College, Nagpada, Mumbai. 400 008.India
Contact:sirajchougle@gmail.com
……………………………………

“Freedom and power bring responsibility….. The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity.” Pandit Nehru, on 14th August 1947.

Introduction:
Two major problems the world faces today is acute poverty with the widening gap between rich and poor. This problem is directly related with our financial system. If properly developed, the banking system can very easily remove poverty and minimize inequalities. The challenge lies in inventing and implementing a financial mechanism that would be able to liberate humanity from the bonds of money, an era of human supremacy over money rather than money over human beings.

Objectives:
There is a need to offer an alternative in the form of Interest free finance, which is also free from speculation, financial engineering and concentration of wealth in the hands of a few. All strategies to promote world prosperity and peace are likely to fail if adequate finance is not available. A beautiful, peaceful and prosperous world is possible, if finance is made available to everyone on the principles of equity, justice and honesty. The objectives of this paper are to study the feasibility and profitability of interest free banking in India. The paper also covers the benefits and challenges of interest free banking in India.

The Islamic Financial System:
“We increase our ability, stability and responsibility, when we increase our sense of responsibility to God”. Interest free Islamic banking is a part of Islamic financial system. Islamic philosophy is based on the Shariah (the Islamic legal and social system) derived from the Holy Qur'an and Hadith. Divine Guidance for the economy, as enshrined in the Qur'an and the Sunnah (the living example of Prophet Muhammad), can be summarized as follows:

1. Trusteeship
The Qur'an Sura 57 Ayat 7, (57:7) emphasizes that all the resources of the earth belong to God, the Creator, who has made human beings a trustee for them. Humans are therefore accountable to God for the uses they make of these resources. The idea of trusteeship distinguishes the Islamic approach to economics from materialistic approaches such as extreme capitalism and socialism. It introduces a moral and spiritual element into business life.

2. Care for Others
Care for others tempers...
tracking img