Islamic Economic System

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Interest-free Islamic economic method is partially followed & partially not followed in Muslim countries around the globe. The only country, which has followed this method in every minute detail is Malaysia. So the application methods in this post are mostly those implemented in Malaysia following the Interest-free Islamic Economic method.

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The main feature of the Islamic economic method is that it is Interest-Free. As the Qur'an says in Sura al-Baqara Chapter two Verses 278 & 279, "O ye who think! fear Allah & quit what remains of your demand for usury if ye are indeed believers. If ye do it not take notice of war from Allah & his Apostle: but if ye turn back ye shall have your capital sums; do not deal unjustly & ye shall not be handled unjustly."

Qur'an condemn all sinful deeds, but never has the Qur'an warned of a war against God Almighty & His Messenger except in the case of taking Interest & Usury.

There's several evils of the interest based economy, the reason why Islam has prohibited it.

For example, if a person takes a loan from a bank & says the cost cost of a definite editorial is ten dollars & they wishes to a profit of dollar. So the selling cost would include the ten dollars cost cost dollar profit & dollar interest & the selling cost would be 12 dollars. The selling cost would go up because of interest & when the selling cost goes up the demand comes down & when the demand comes down the supply comes down & as supply comes down production comes down causing labour issue & unemployment.

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There is Social Injustice.

For example, if a person takes a loan from the bank & no matter if they earns a profit or goes in loss they has to pay that fixed amount of interest. Even if some natural calamity befalls his relatives, such as flooding or earthquake, the person still has to pay the loan with the interest & a delay would only increase the amount of interest. It is social injustice.

There is no social consideration.

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Suppose, if businessmen come to ask for a loan from a contemporary bank & businessman wishes to start a social or hospital while the other businessman wishes to start an alcohol factory or a betting den. But natural the businessman, who wishes to start an alcohol factory or a betting den would have better returns & the loan given to him would be more secure & they would give a higher rate of interest as compared to the business, who wishes to open a school or hospital. Modern banks are only interested in getting better & higher returns. That is why they finance betting dens than schools or hospitals. That is why in the 80s thousands of betting dens were financed by modern banks worldwide. For name sake only a few social projects are financed by modern banks & all of their loans are based on better interest.