INTEREST FREE BANKING
Points: Introduction – Function of the modem banking – Commandments of the Holy Quran and the Holy Prophet Views against interest free banking – Bold step of the government – Conclusion.
Modem banks play a vital role in the economy of a country. Bank carries its business in terms of money. It collects money as "deposits" from the people and gives the same on loan to the traders, businessmen, producers and entrepreneurs. It helps the country in increasing production and employment. The money collected by it as "deposits" is really the surplus money which the community has and directs it to the productive channels.4essay.blogspot.com
The present functioning of modern banking is based on fixed rate of interest. It has no doubt contributed a lot to the expansion of the country's production capacity and services, but at the same time it has been responsible for causing voids and imbalances in our society. The existing banking service entertains only the small privileged class and all facilities of banking credits are extended only to it. This arrangement creates class differences in society and causes inflation. Owing to the monopolistic hold on banking operations by the privileged class, the proper development of the country's productive resources, both agricultural and industrial, as well as the expansion of numerous other services, has lost its direction and remained unachieved. It gave birth to capitalistic system of economy with all its evils. The tragedy is that while the common man continues to suffer, we the Muslims of the Islamic Republic of Pakistan have failed to evolve a system in order to ameliorate his lot. There remains hardly any doubt that the fixed interest banking has been mainly responsible for price hike and inflations.4essay.blogspot.com
Interest free banking was a demand of the public since long as the Holy Quran has singularly prohibited interest (Riba) in all forms. It is declared 'Haram' by the Holy Prophet (Peace be upon him). With so clear a commandment of the Holy Quran and also clear cut direction of the Holy Prophet (Peace be upon him), there does not remain any room or justification for the continuation of interest in an Islamic state.
There are many who think that interest free banking is not feasible in our country. It is possible in rich countries which can meet the expenses of the banking. In our economy interest free banking will be only a futile exercise. It will have an adverse effect on our already deteriorating economy. It will not be able to succumb to any further shocks or jolts with this kind of experimentation.4essay.blogspot.com
After a careful consideration of all these and other allied points, our government took a bold step to abolish interest from the banking system of the country. To abolish interest, participation on a profit and loss basis has been introduced in the banks which aloe encouraged to operate on a no-interest basis. This enables people to forge ahead in life on the strength of their personal qualities and competence rather than their wealth, the accumulation of which should not be sole object of a man's life any way.
It is not an easy job to do away with the century old institution of interest. It cannot be adopted instantly. In such a complicated state of affairs, we can get rid of interest system by gradual process.