Prohibition Of Interest Research Articles

Historical Trajectories and Modern Dynamics of Islamic Financial Law in Central Asia

Abstract This paper examines the historical development and contemporary landscape of Islamic financial law in Central Asia. Rooted in Sharia principles such as avoiding riba (usury), gharar (uncertainty), and maysir (gambling), Islamic finance has evolved into a sophisticated framework that promotes equity, transparency, and social welfare. In Central Asia, a predominantly Muslim region shaped by diverse cultural influences, Islamic financial jurisprudence reflects a unique blend of traditional practices and modern regulations. The growth of Islamic finance in this region is driven by increasing awareness, regulatory support, and integration with global markets. Key principles like the prohibition of interest, risk-sharing, and asset-backed financing underpin the operations of Islamic financial institutions. Case studies from Kazakhstan, Uzbekistan, and Tajikistan illustrate successful implementation strategies. The paper concludes by emphasizing the potential for Islamic finance to drive sustainable economic development in Central Asia and the need for ongoing research, collaboration, and policy support to navigate the complex dynamics of this evolving field.

The Effect of Implementing Sharia Principles in the Financial Industry on Economic Stability: Case Study at Bank BTPN Syariah

This study investigates the impact of implementing Sharia principles on economic stability, using Bank BTPN Syariah as a case study. By adhering to core Islamic financial tenets such as the prohibition of interest (riba), the avoidance of excessive uncertainty (gharar), and the emphasis on risk-sharing and asset-backed financing, Bank BTPN Syariah aims to foster a more resilient and ethical financial system. Data was collected through interviews with key stakeholders, surveys of clients, and analysis of financial documents. The findings indicate that the application of Sharia principles contributes significantly to financial stability by promoting prudent risk management and ethical investment practices. The bank's focus on financial inclusion and supporting underserved communities enhances economic stability and client trust. This study reinforces existing theoretical frameworks that highlight the benefits of Islamic banking in mitigating financial risks and promoting sustainable economic growth. Practical implications for Bank BTPN Syariah include maintaining strong regulatory compliance and enhancing ethical conduct, while broader recommendations for the Islamic banking sector and policymakers emphasize the need for supportive frameworks to facilitate the widespread adoption of Sharia principles. Future research should explore the long-term impacts of Sharia-compliant practices and the role of technological advancements in this sector.

Holistic Integration: Syariah Finance Principles in Islamic Education Management

Islamic education management requires a holistic approach that considers Islamic values in every aspect, including financial management. This article discusses the integration of Shariah finance principles into Islamic education management to achieve financial sustainability and promote Islamic moral values. The main principles of Shariah finance, including transparency, justice, risk-sharing, and prohibition of interest, are the primary focus of this research. The research methodology adopts a qualitative approach through literature review and interviews with experts in Shariah finance and Islamic education. Data analysis techniques involve categorizing information and synthesizing findings relevant to the integration of Shariah finance principles into Islamic education management. The results indicate that integrating Shariah finance principles into Islamic education management can enhance efficiency, fairness, and sustainability of educational institutions. The implications of this research emphasize the importance of training and education for Islamic education practitioners to apply Shariah finance principles in their management practices. The holistic integration of Shariah finance principles into Islamic education management not only creates financially sustainable educational institutions but also strengthens the religious and cultural identity of Muslim communities. This supports the vision of Islamic education encompassing spiritual, moral, and academic aspects.

Islamic marketing of conventional banks: bridging managers’ and clients’ perceived gaps

Purpose While the Noble Quran dictates the prohibition of interest, conventional banks promote Islamic banking by opening Islamic banking windows. Against this backdrop, this study aims to investigate the perceived gaps between managers and clients in Islamic marketing and banking, focusing on conventional banks’ Islamic banking windows. Design/methodology/approach Guided by a qualitative approach, semi-structured personal interviews and observations served as the data collection methods, involving 25 banks and 50 respondents in 3 different districts, namely, Shirajganj, Rajshahi and Chapainawabganj of Bangladesh from January to October 2023. The data were analysed using ATLAS.ti 2023 to explore codes and quotations derived from 14 interview questions. Further, ATLAS.ti 2023 facilitated synthesizing content, concepts, code occurrence, network analysis and thematic analysis. Findings Islamic and non-Islamic banks use Quranic verses, hadiths (prophetic traditions), images of mosques, the Kaaba and Arabic texts as Islamic marketing tools. These spiritual, divine and prescriptive tools are associated with Islamic banking. However, conventional banks receive criticism for having separate Islamic banking windows to serve religiously conscious clients, which generates tension among clients and bank managers. Practical implications The findings can theoretically assist academics in examining conventional banks’ Islamic marketing and banking practices, opening Islamic banking windows. Importantly, Shariah boards can play policy roles in safeguarding the function of Islamic marketing and banking. Managers can use the findings to anticipate client perceptions and enhance Islamic marketing and banking strategies. Likewise, the social implications include the explicit stance of Shariah to mitigate the mixture of halal and haram banking. Originality/value This pioneering study explores the perspectives of Islamic banking windows by non-Islamic banks. The combination of Islamic marketing and banking is a noteworthy novelty in this study and deserves recognition for its unique contribution to halal marketing and finance.

Prinsip Keadilan dan Kebebasan dalam Pemikiran Ekonomi M. Umer Chapra

This research was motivated by researchers' interest in the figure of Umer Chapra as one of the leading figures in Islamic economics and finance. One of Chapra's deep and critical ideas is about usury or bank interest which he put into a small book entitled "Prohibition of Interest: Does it make sense?". This work was quite "impressive" for Chapra because it was written at the request of many people who wanted to see Chapra's critical review regarding bank interest. This research aims to examine various main ideas that dominantly exist in Chapra's economic thinking in the book "The Prohibition of Interest". This research is a study with a qualitative paradigm and is also included in library research. The primary source for this research was obtained from Chapra's original work, while the secondary source came from the works of other people who studied Chapra's thinking, both from research, book reviews and other articles. There are various interesting views discussed by Chapra on economic problems. However, overall, it is revealed that Chapra's thinking in an economic context basically carries the principles of justice and freedom, as part of the principles of Islamic economics.

The Norm of Rate Fixing of Islamic Banks Based on Conventional Bank Rates: Evidence from Indonesia

Interest rate fixing is a monetary tool used to control the money supply and hence inflation by the central bank. However, it cannot be applied to Islamic banks due to the prohibition of interest in Islam. This paper examines whether the central bank may implement rate fixing for Islamic banks, given that interest is forbidden, and the fixing of prices by the government is also generally prohibited, according to Hadith and the consensus of Islamic jurists. A documentation study was conducted to comprehend the viewpoints of classical and contemporary Islamic jurists and the National Shariah Board−Indonesian Ulama Council's fatwa. The analysis used Islamic law methodology (uşūl fiqh), which included combining the opinions of classical and contemporary Islamic jurists through the al-jam’u and the legal maxim approach, "al-‘ādah muhakkamah" approach to the custom practiced by Islamic banks, and the maqāşid approach. The research findings illustrate that Islamic banks have been using rates to calculate profits as the National Shariah Board−Indonesian Ulama Council accepts the notion of the time value of money, provided it is not utilized in loan transactions. This condition could enable the central bank to set the rates for Islamic banks, which is an effective tool for controlling the money supply and achieving economic stability, thus contributing to the realization of community welfare (maslahah 'ammah).

Analisa Instrumen Keuangan Perbankan Syariah Studi Kasus PT Bank Tabungan Negara. Tbk

Islamic financial institutions use an accounting system that is different from conventional accounting. The basis of sharia banking accounting follows the principles of Islamic economics which include the prohibition of interest or what is often called usury (including other usurious practices), then the prohibition of investment in businesses that are considered haram, as well as encouraging fair wealth and economic growth.

Proponents and Opponents of Islamic Banking: An Overview of the Stances adopted in the Articles published in HEC Approved Research Journals

Islamic banking is a financial system that adheres to the principles of Sharia law, which prohibits the charging of interest. Scholars have differing perspectives on Islamic banking, with some arguing that it is a more ethical and sustainable form of banking, while others contend that it is not truly interest-free or transparent. This paper critically examines the perspectives of various scholars on Islamic banking as presented in HEC recognized journals. First school of thought, represented by Dr. Fazlurrehman, distinguishes between riba and commercial interest. They do not consider commercial interest to be riba, and therefore believe that conventional banking is not in conflict with Islamic teachings. A second school of thought, represented by Mufti Taqi Usmani, Prof. Khurshid Ahmed, and others, advocates for the Islamization of the conventional banking system. They believe that banks can be modified in accordance with Islamic teachings to create a more ethical and interest free financial system. On the other hand, Mufti Rashid Ahmed and Mufti Dr. Abdul Wahid, views Islamic banking as a positive development for Muslims, but does not believe that the current Islamic banking system is fully based on Islamic law. They have proposed suggestions for how the system can be made more acceptable.
 A third school of thought, represented by Dr Muhammad Zahid Siddique Mughal and others, completely rejects Islamic banking. They argue that there is no real difference between conventional and Islamic banking. There are many reasons why scholars have different opinions about Islamic banking. One reason is that there are different arguments presented in Islamic law about the prohibition of interest. Another reason is that there are different methods of Islamic banking and scholars have different opinions about these methods. These opinions vary depending on social, and economic factors. However, there is no doubt that it is a growing field, with Islamic banks operating in over 75 countries around the world.

The Effects of Interest (Riba) on Economy: A Related Review

The article "Effects of Interest on Economy" discussed elaborately about interest from the angle of socio-economic outlook. Here the characteristics of interest and its negative effects have been discussed logically and beautifully. By reading this article one can get a clear picture of how interest creates economic and social instability as well as the harmful effects of interest on investment and production. The holy Quran prohibited interest and all forms of interest-based transaction 1400 years ago. From this article one can know that the prohibition of interest is applicable for Muslims and non-Muslims alike. So, in order to free our economy from the cruel clutch of interest, Muslims and non-Muslims all have to come forward to remove interest from the society.
 Beside creating public awareness against interest, we have to find out a proper alternative to interest-based economy. For this, the brilliant minds of our country should employ their skill, intelligence and sincerity. Not only Bangladesh, the whole world must be shown an effective Islamic economic system by following which mankind can free themselves from financial crisis.

The Interest-Free Instruments Used for Public Borrowing in the Ottoman Empire and Medieval Europe: A Comparative Perspective

Borrowing is not only a practice of individuals and corporations, but the states also borrow to afford their expenditures. Similar to individuals, the states have borrowed since ancient times. Most of such loans have been at interest. However, the authorities have restricted or prohibited interest-based lending in various societies. Thus, the city-states of Medieval Europe and the Ottoman Empire could not always use ordinary borrowing instruments due to the prohibition of interest. Since, in recent years, the modernized forms of the early interest-free public borrowing methods are being asserted to be used by modern economies as well, the paper evaluates the methods used by the European city-states and the Ottoman Empire. At first, rentes and compera, the public borrowing methods used by city-states in Medieval Europe, are presented. Then, iltizam, malikane, and esham, the instruments used by the Ottoman Empire, are introduced. Lastly, the similarities and discrepancies among these interest-free methods utilized by the city-states and the Ottoman Empire are scrutinized.

Islamic Macro Economy: A New Paradigm

This study seeks to explore Islamic macroeconomics as a new paradigm and its application in controlling inflation, monetary and fiscal in conventional and Islamic macroeconomics. Then explore some points about the development of macroeconomics at the time of the Prophet Muhammad. The approach method used in this study is descriptive qualitative analysis, with library research data collection techniques using secondary data in accordance with a number of relevant literature. Then the data analysis technique was carried out by inductive deductive techniques. The results show that monetary policy is an important instrument of political policy in the economic system, both conventional and Islamic and this policy has existed and began to develop since the time of the Prophet Muhammad. The fundamental difference between Islamic and conventional macroeconomics lies in the purpose and prohibition of interest in Islam, the condition for achieving and ensuring the proper functioning of the monetary system is that the monetary authority must supervise the entire system. Monetary policy and fiscal policy are macroeconomic policies that are very important in relation to achieving inflation targets and economic growth. Therefore, in an effort to overcome inflation, monetary and fiscal policies, the government can carry out various macroeconomic policies to achieve inflation targets and economic growth.

Banking system stability in the MENA region: the impact of market power and capital requirements on banks’ risk-taking behavior

PurposeThis paper aims to investigate the impact of capital requirements and bank competition on banks' risk-taking behavior in the Middle East and North Africa (MENA) region.Design/methodology/approachThe study combines both descriptive and analytical approaches. It considers panel data sets and adopts panel data econometric techniques like fixed effects/random effects and generalized method of moments estimator.FindingsRegulatory capital and market competition have different effects according to the bank’s type (Islamic or conventional). The results show that the capital adequacy ratio has a significant impact on the credit risk of conventional banks (CBs) while this effect is irrelevant for Islamic banks (IBs). However, market competition plays a significant role in shaping risk-taking behavior of Islamic banking institutions. Our results indicate that banks with strong market power may pursue risky strategies in the face of increased regulatory pressure (e.g. increased minimum capital requirements). The results were robust to alternative profitability measures and endogeneity checks.Research limitations/implicationsThe most important limitation is the lack of data for some banks and years, and this paper had to exclude some variables because of missing observations. The second limitation concerns the number of IBs in the sample. However, this can be overcome by including more countries from MENA and other regions where Islamic banking is a growing phenomenon.Practical implicationsOur findings call for a change in Islamic banking’s traditional business model based on the prohibition of interest. The analysis indicates that market concentration moderates the association between capital requirements and the insolvency risk of IBs but not CBs. Therefore, regulatory authorities concerned with improving financial stability in the MENA region should set up their policies differently depending on the level of banking market concentration. Finally, bank managers are requested to apply a more disciplined approach to their lending decisions and build sufficient capital conservation buffers to limit the impact of downside risk from the depletion of capital buffers during the pandemic.Originality/valueThis study addresses banks’ risk-taking behavior and stability in the MENA region, which includes banks of different types (Islamic and conventional). This paper also contributes to the literature on bank stability by identifying the most critical factors that affect bank risk and stability in the MENA region, which can be relevant in the context of the new global (COVID-19) crisis.

Why is Mudaraba not Practiced by Islamic Banks How can Islamic Banks Apply Mudaraba Financing Method through Models

A partnership agreement known as a mudaraba is one in which one party contributes finance and the other contributes labor or skills to a joint venture. A pre-determined ratio is used to divide the gains, and the capital provider bears the losses. Due to its compliance with the principles of risk-sharing, profit-sharing, and interest prohibition, mudaraba is one of the principal sources of financing in Islamic banking. However, due to a number of difficulties and limitations, including moral hazard, adverse selection, agency issues, a lack of standardization, legal ambiguity, and regulatory concerns, mudaraba is not frequently used by Islamic banks. The purpose of this study is to investigate the factors that contribute to Islamic banks' limited use of mudaraba and to suggest some models that could help with its implementation in various fields and situations. The paper uses a qualitative methodology based on a review and analysis of the literature. The study concludes that Islamic banks can implement mudaraba using a variety of models, including deposit, investment, project, social, and hybrid mudaraba. The paper also makes some recommendations for boosting the viability and efficacy of mudaraba financing, including enhancing governance, creating a legal framework, promoting standardization and disclosure, boosting supervision and monitoring, and raising awareness and education.

The problem of social responsibility in Islam

The article examines social responsibility in the context of Islam, emphasizing its key aspects and specifics in the sphere of religious relations. Five postulates are identified that regulate the moral system and determine the basis of social responsibility in Islam: unity, balance, freedom of will, obligations, and virtue. The article identifies the system for achieving social and economic justice in Islam through payments from income and property of the religious tax (zakat), the creation of charitable funds (waqf), almsgiving and charity (sadaqah), interest-free loans (al-qard al-hasan) are among the others. The prohibition of interest (riba) is identified as an important basis for the system of social responsibility and sustainable development in Islam. The methodology of the article consists of the analysis of the primary sources of Islamic doctrine, as well as identifying the main aspects and specifics of social responsibility in the context of Islam. The article also uses a comparative approach, highlighting the differences and similarities between the concept of social responsibility in Islam and its analogues in other cultures and religions.

Strategic Directions for Developing an Islamic Banking System

Islamic banking generally referred to as interest free banking has been gaining popularity in the recent past. The main pillar of Islamic finance is prohibition of interest. Unlike conventional banking where interest is an integral part of the banking system, Islamic banking avoids interest in all bank transactions [Samad and Hassan (1999)]. The banking system in Pakistan is undergoing a transition from conventional model of banking to the new concept of Islamic banking, based on principles of Islamic economics. The new system should not only eliminate interestbased transactions but also introduce the concept of “Zakah” a contribution to the poor [Molla, et al. (1988)]. The prohibition of Riba is based on the arguments of social justice and equality.

Earthly Punishment for the Violation of the Prohibition of Interest in Islam

Interest has been in human beings’ daily economic life since ancient times. Receiving interest was mostly considered evil and the source of many social and economic problems. Therefore, interest was either entirely prohibited or allowed at rates under defined limits in many societies. The interest-based transactions were attempted to regulate by using financial, moral, religious, and legal instruments. Besides others, the spiritual means were considerably harsh. Receiving interest was considered a sin in most of the prevalent religions. Among these, the afterlife sanctions defined for the offenders against the prohibition of interest are the most severe in Islam. This paper aims to evaluate the legal sanctions for not respecting the prohibition of interest-based transactions. Since Islam takes an explicit stance against interest, the earthly punishment practices in Muslim societies for violating the prohibition of interest were studied. It is observed that the implemented weak earthly sanctions are inconsistent with the severe afterlife punishments in Islam.

Islamic and capitalist economies: Comparison using econophysics models of wealth exchange and redistribution

Islamic and capitalist economies have several differences, the most fundamental being that the Islamic economy is characterized by the prohibition of interest (riba) and speculation (gharar) and the enforcement of Shariah-compliant profit-loss sharing (mudaraba, murabaha, salam, etc.) and wealth redistribution (waqf, sadaqah, and zakat). In this study, I apply new econophysics models of wealth exchange and redistribution to quantitatively compare these characteristics to those of capitalism and evaluate wealth distribution and disparity using a simulation. Specifically, regarding exchange, I propose a loan interest model representing finance capitalism and riba and a joint venture model representing shareholder capitalism and mudaraba of an Islamic profit-loss sharing system; regarding redistribution, I create a transfer model representing inheritance tax and waqf of an Islamic wealth redistribution system. As exchanges are repeated from an initial uniform distribution of wealth, wealth distribution approaches a power-law distribution more quickly for the loan interest than the joint venture model; and the Gini index, representing disparity, rapidly increases. The joint venture model's Gini index increases more slowly, but eventually, the wealth distribution in both models becomes a delta distribution, and the Gini index gradually approaches 1. Next, when both models are combined with the transfer model to redistribute wealth in every given period, the loan interest model has a larger Gini index than the joint venture model, but both converge to a Gini index of less than 1. These results quantitatively reveal that in the Islamic economy, disparity is restrained by prohibiting riba and promoting reciprocal exchange in mudaraba and redistribution through waqf. Comparing Islamic and capitalist economies provides insights into the benefits of economically embracing the ethical practice of mutual aid and suggests guidelines for an alternative to capitalism.

BANK INTEREST HALAL: DISTINCTION INTERPRETATION OF CONTEMPORARY ULAMA THOUGHT UMER CAPHRA AND MUHAMMAD SAYYID THANTHAWI

Life is controlled by two great forces, namely economy, and religion. All things based on Sharia law are clearly about halal and haram. Bank interest is something that is no longer common among the public, with the law and practice still being debated by some scholars. Therefore, this study aims to answer public confusion about the law of halal interest according to Umer Caphra and Muhammad Sayyid Thanthawi and the reasons for making legal decisions regarding bank interest. The research is in the form of a qualitative method with a literature study using several references from books and journals in concluding the views of the two figures. The primary data used is from the book Prohibition of Interest: Does it make sense? The work of Umer Chapra. While secondary data comes from various books and journals related to bank interest. The results of this study indicate that the two scholars have different opinions regarding bank interest. Umer Chapra argues that the practice of bank interest is prohibited in Islam because usury interest can harm the poor. Meanwhile, Muhammad Sayyid Thanthawi argues that bank interest is not part of usury because bank interest is not part of faith and worship.

ANALISIS PERMINTAAN UANG PADA MASYARAKAT ISLAM KONTEMPORER

This study aims to analyze and determine the effect of interest rates and GDP on the demand for money in contemporary Islamic society. This type of research is descriptive and associative. While the type of data is documentary data, the data source is secondary data and time series data from the first quarter of 2015 to the fourth quarter of 2018. The analysis tool is a simultaneous equation model using the Two Stages Least Squared (TSLS) method.
 The results of the study conclude that the existing estimates explain that interest rates do not have a significant effect on the demand for money. This fact supports the initial hypothesis which states that there is no effect of interest rates in motivating a contemporary society to hold money in Indonesia. What has a significant effect on the demand for real money based on estimates, is that the level of income in accordance with the theory of income levels will have a positive effect on the demand for money.
 Based on the results of the research conducted, suggestions can be given, namely, even though the results show that there is no significant relationship between the interest rate and the demand for money, it is not necessarily the insignificant effect of the interest rate because most Indonesian people embrace Islam and have good awareness. against the prohibition of interest, but it could also be due to the high rate of profit sharing from Islamic banks.
 So that there is no such public attitude, we still need to promote Islamic banking products, and a good explanation about the prohibition of interest. In addition, the improvement of Islamic banking services is also very important in this regard.

Muḥammad al-Amīn al-Hararī’s Approach on Interest (Ribā) in His Tafsīr Work Ḥadāʾiq al-Rawḥ wa al-Rayḥā

Interest transactions and contracts are too old to be known precisely and exist in every society. The issue of the legitimacy of interest has been constantly discussed by clergy, philosophers, economists, and those who are interested in the subject since its emergence. While interest transactions with are prohibited in all divine religions based on revelation, some preventive measures have been taken against interest in many systems that are not based on religion. In the pre-Islamic period, the interest transactions, which were widely applied in the society of ignorance (jāhiliyya), are mentioned in the Qur’ān and the Prophet. It is forbidden in the hadiths of the Prophet. Interest, which is expressed with the concept of ribāin the Qur’ān, hadiths, and fiqh literature, has been forbidden with all its forms. Since the texts prohibiting interest are clear, there is an agreement on this issue. Discussions on ribā and interest in Islamic society were carried out over details such as the types of ribawī goods, which types of contracts are included in transactions with interest. Islamic scholars and mujtahid imams have developed a holistic approach when dealing with the issue of interest and have evaluated the issue in connection with the dimensions of creed, practice, morality, social life, and economics. In the contemporary period, the subject of interest has started to be discussed in different dimensions, due to reasons such as industrialization, the diversity of economic and commercial areas, the capital in the world-changing hands mostly through banks, and the fact that the capital is in the hands of non-Muslims rather than Muslims. Different views have been put forward in the discussions on the meanings of ribā, interest, credit etc.. While explaining the related verses by reflecting the problems of the period in which they lived in their commentaries, the commentators also included the discussions in question. Muḥammad el-Amīn al-Hararī (d. 2019), one of the contemporary commentators, has put forward his own original views by referring to these discussions in the interpretation of the verses about interest in his tafsīr work Ḥadāʾiq al-rawḥ wa al-rayḥān. In this study, al-Hararī’s comments on the verses related to the prohibition of interest in his tafsīr are focused, and the views on this much discussed subject of today's economic life are tried to be grounded by using classical and modern sources. Al-Hararī’s views on interest are important because he offers some suggestions to the problems of today's people. While interpreting the verses of 2/275.-279. of the sūrat of al-Baqara, al-Hararī adopted the classical understanding of interest. In the interpretation of the verse of sūrat Āl Imrān 3/130 he put forward his own unique views on interest, especially on loans taken from banks. He divided the harams into “li-aynihī harām” and “li-gayrihī harām”, that is, haram due to himself and haram due to something else. He considered the loans that today's people take from banks in return for interest as “ribā al-nasī’a”, that is, li-aynihī harām. However, based on the principle of necessity, he defended the view that a bank loan could be obtained in case of need. He said that if a Muslim cannot find any other kind of debt, the responsibility of obtaining an interest loan based on need and necessity will be on the recipient, not the lender. The main subject of this study is al-Hararī’s views on interest rate loans.