IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Can The Model Of The Riba-Free Islamic Commercial Bank Provide A New Paradigm For The Future Of Global Banking?: A Theoretical Review

Listed author(s):
  • Nico P. Swartz


    (University of the Free State)

Registered author(s):

    The study shows that there is a need for riba-free banks in all countries where Muslims live. However, most countries operate under conventional banking laws, and it is futile to expect the situation to change; and it does not need to change. The interaction between the traditional Islamic and the conventional Western bank will make possible the setting up of a new type of bank, i.e. riba-free commercial banks. This riba-free commercial bank will serve as a new paradigm for global banking. Under the riba-free commercial bank, all current account services rendered by the conventional model will be provided. The difference is that where, in the conventional system, six components (interest, services cost, overhead costs, risk premium, profit, compensation for inflation) are treated as a compound to justify riba, the riba-free commercial system treats these components separately in order to avoid riba. The result will be that interest stands to be charged, while riba is to be prohibited. Riba-free, but not cost-free, loans and advances will form the basis of riba-free commercial banking. It means that riba-free commercial banks must be free of the encumbrances of charitable loans. In this riba-free commercial model, interest is to be associated with trade or profit, which is permissible in Islam. In riba-free commercial banking, aspects of both conventional and Islamic finances are combined. This will allow Islamic societies to have the best of both worlds, and this is the model of banking the world is waiting for. It is now up to the Muslim and conventional bankers and others to take steps to establish such riba-free commercial banks (not interest-free) in all countries of the world

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    Article provided by Global Research Agency in its journal Journal of Global Business and Economics.

    Volume (Year): 2 (2011)
    Issue (Month): 1 (January)
    Pages: 86-94

    in new window

    Handle: RePEc:grg:01biss:v:2:y:2011:i:1:p:86-94
    Contact details of provider: Web page:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:grg:01biss:v:2:y:2011:i:1:p:86-94. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (editor)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.