Reforming the Global Financial System with a Riba Free System: A Malaysia’s Perspective

The current global financial system that is based on the concept of riba or usury encourages all sorts of elitism, economic imbalance a financial insecurity often emerging into financial systems scandals and vulnerability. On the other hand, shari’ah compliant of the Islamic financial system promoting riba-free financing that entail equity, risk sharing and ethical business practices throughout the society. This paper examines the possibility of the proposed change from conventional system to riba-free systems through an assessment of the benefits of a riba-free system. Furthermore, Malaysia has been chosen in this study due to its role as a leading Muslim country that are consistently offering an Islamic financial system since 1963. Among the benefits of the riba-free systems includes it promotes economic justice and equity, enhanced the financial stability, aligns with cultural and religion values as well as to support the growth of small and medium enterprise (SME) industries. However, this proposed riba-free approach faces some challenges such as the issues of standardisation, greater sensitization and political constraints in many countries. In addition, this paper discusses the fundamentals of riba-free system which were breaks down to the prospects and challenges of carrying out this process on an international scale. In the nutshell, the inclusion of fairness with asset-backed financing enhances a riba-free system as it cares for economic and financial sustainability for all people within the economy as well as to strengthening the ethical values.