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Banking Without Interest

Author

Listed:
  • Ilieva, Jana

    (University of Tourism and Management in Skopje, Macedonia)

  • Ristovska, Natasha

    (University of Tourism and Management in Skopje, Macedonia)

  • Kozuharov, Saso

    (University of Tourism and Management in Skopje, Macedonia)

Abstract

In recent years, there has been increased global awareness of Islamic finance. This topic is mainly opened with respect to the great financial crisis that mostly hit the banking system and the financial markets and caused many bank bankruptcies and state interventions. This paper analyzes the basic principles of Islamic banking. The absolute prohibition of receiving and giving interest (Riba) and profit-and-loss sharing (PLS) paradigms are elaborated in detail; they are primarily based on mudarabah (profit-sharing) and musyarakah (joint venture) concepts which nowadays are becoming an accepted way of doing business in several Western multinational banks. An overall comparison of the advantages of Islamic vs. conventional banking is also given. Islamic finance technology solutions have matured and they will face various challenges in the following decades, due to conventional banks offering, increasingly, Islamic products. The need for a more comprehensive environment and regulatory framework is emphasized, so that Islamic banking development can be ensured.

Suggested Citation

  • Ilieva, Jana & Ristovska, Natasha & Kozuharov, Saso, 2017. "Banking Without Interest," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 8(2), pages 131-139.
    • Handle: RePEc:ris:utmsje:0204
    as

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    File URL: http://utmsjoe.mk/files/Vol.%208%20No.%202/UTMSJOE-2017-0802-07-Ilieva-Ristovska-Kozuharov.pdf
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    References listed on IDEAS

    as
    1. Ali, Mohsin & Azmi, Wajahat, 2016. "Religion in the boardroom and its impact on Islamic banks' performance," Review of Financial Economics, Elsevier, vol. 31(C), pages 83-88.
    2. Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
    3. Ahmed,Habib & Mohieldin,Mahmoud & Verbeek,Jos & Aboulmagd,Farida Wael, 2015. "On the sustainable development goals and the role of Islamic finance," Policy Research Working Paper Series 7266, The World Bank.
    4. Saida Daly & Mohamed Frikha, 2016. "Banks and economic growth in developing countries: What about Islamic banks?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1168728-116, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Adnan Malik & Karim Ullah & Shakir Ullah, 2020. "Knowledge Diffusion Process & Common Islamic Banking Governance Principles: Integrative Perspective (s) of Managers and Shariah Scholars," Papers 2002.04067, arXiv.org.

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    More about this item

    Keywords

    Islamic; law; finance; banks; growth;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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