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This paper aims to achieve two goals: first, to evaluate the existing interest-free monetary policy tools in the major Islamic financial hubs of Malaysia, Pakistan and Bahrain and; second, to suggest how monetary policy tools in Turkey can be used in other countries.

This study follows a qualitative research method based on literature review, comparison, evaluation and design.

The policy rate cannot be used due to Shariah concerns. The reserve requirement depends on qard, and the reserves should be kept separately in the central bank. In terms of ijarah sukuk, Shariah concerns should be taken into account and a new structure, as displayed in Figure 3, should be followed. Government investment certificates can be used as an interest-free monetary policy tool. A genuine mudarabah interbank investments can also be used. Wadiah acceptance with no habitual gift can be used as well, and Tawarruq and central bank notes are not preferable due to Shariah concerns as well. Having said that, a Turkey-based tawarruq platform can be structured for others to use instead of applying to London.

This paper’s unique suggestion is to develop an interbank taqaruz market and a taqaruz method with the central bank. It is also unique for Turkey in the subject.

The main objective of the paper is to understand the reasons why Islamic banking failed in Pakistan despite lots of efforts being made to implement in contrast to its success in other parts of the world.

The paper is based on a debatable conceptual approach. It provides a longitudinal view of the issue of replacing the interest‐based financial system in Pakistan with an interest‐free system by taking the religious, socio‐economic and political factors of the country.

The findings of the paper hold that piecemeal solutions to eliminate interest from the financial sector of Pakistan could never succeed. It concludes that all intellectual, practical, political, constitutional and legal efforts undertaken in Pakistan to enforce an interest‐free system were not meant in earnest and therefore they inflicted serious damage to the cause of Islam as well as Islamic banking. Interest is prohibited in Islam for its exploitative nature. In case of Pakistan, interest institution is not only deep‐rooted, but also strongly interlinked with other exploitative tools that are prevalent in the hands of some selected people to keep their control over political, economic and social spheres of Pakistan. There is an indispensable need to eradicate interest along with its allied forces from the polity of Pakistan. The practical success of interest‐free banking and finance movement in Pakistan could not be materialized unless the state and polity of Pakistan are not convinced seriously to discover the paradigm of their personal and state institutions based on Islamic guidance and principles.

The contents of the paper woven around normative and social disciplines and therefore, it is not possible to devise any statistical model to empirically test the contribution of these socio‐economic factors in a failure of interest‐free banking and finance movement for future research and any identified limitations in the research process.

The paper provides a broarder perspective over the issue of eliminating interest from the national economy and financial sector of Pakistan. The paper figures out some serious political, social and micro and macro economic constraints that should be first sorted out to pave the way for any viable strategy to succeed in replacing the existing system with risk‐sharing and alternative interest‐free mechanisms. The findings of this paper may be useful for the policy makers, researchers, academicians, financial experts, Islamic Shariah scholars, bankers, regulators, Islamic financial institutions and those Muslim countries who wish to undertake a similar kind of experiment as was attempted in Pakistan. This paper may also help the Western economist to think and debate about an alternative interest‐free economic and financial system of Islam.

Uses logit, probit and discriminant analysis to test for structural differences between the financial characteristics of interest‐free banks and conventional banks. The analysis extends to various financial dimensions which evaluate performance, namely: liquidity, leverage, credit risk, profitability and efficiency. Covers 15 interest‐free banks and 15 conventional banks. The statistical evidence suggests that the two groups of banks may be differentiated in terms of liquidity, leverage and credit risk, but not in terms of profitability and efficiency.

The main objective of this paper is to highlight the main features of interest‐free banking theory and practice in Pakistan over the last three decades. It explores the country‐wide interest‐free banking movement since its inception in 1980 to its demise in 2002, and the reasons for such outcome. Moreover, it addresses the question why interest‐free banking has been recently reinstated by the government of Pakistan under the dual banking system and more importantly, would it be any real and big success?

The paper explores concepts, model, strategies and practical issues related with the Islamic banking and finance system. It holds a conceptual approach. It is designed as a case study that provides comprehensive analysis over the contributions made by political, government, financial, legislative and religious institutions of Pakistan in setting‐up the interest‐free banking and finance system in the country.

The findings of the paper hold that all intellectual, practical, institutional, political, constitutional and regulatory measures undertaken by the government and top policy makers of Pakistan to transform the banking system of the country Shariah compliant were devoid of real urge and effectiveness, only piecemeal solutions. The interest institution got very firm roots in the financial sector of Pakistan and strongly supported by other exploitative agents and systems that prevail in the socio‐economic life of the country. There is a dire need to take revolutionary steps with strong political and public support and commitment to uproot interest along with its allies from Pakistan economy and society. After all, Pakistan is an ideologically‐based Muslim country that holds the constitutional responsibility to eliminate interest from its economy and establish a fair and just socio‐economic order.

The paper envisages the main concepts, models and strategies adopted in implementing the Islamic economic and finance system in Pakistan. However, it does not deal in quantitative data and statistical tools to support its findings by empirical evidence. Rather it entails subjective analysis and critique work.

The paper provides the deeper insight of highly technical, complex and mammoth job of eradicating interest from Pakistan economy that was deeply rooted and also strongly supported by other exploitative forces prevailing in the socio‐economic life of the country, causing gross distribution of wealth and concentration of resources and powers in the hands of few. It explains that the need for a major change in one institution or system entails the demand for bringing radical changes in the whole set‐up of country. This paper undertakes longitudinal view to analyze the institutional, financial, judicial and political developments that took place in Pakistan to restructure its economy on Islamic lines. It lays down all relevant facts and issues systematically to provide a clear‐cut assessment over the past, present and future of interest‐free banking movement in Pakistan.

The purpose of this paper is to demonstrate a comparative study of financing small and cottage industries (SCIs) by interest‐free banks in different countries like Turkey, Cyprus, Sudan and Bangladesh.

The objectives are achieved by analyzing data based on an “institutional network” theoretical frame of references. The methodological approach used in the research is of a qualitative nature.

The research result shows that the lender–borrower network relationship, especially in case of financing rural‐based SCIs by interest‐free banks, differ from one country to the other even though the basic principles of interest‐free financing remains the same.

The ideas of interest‐free financing system (IFS) and its specific mode of lending funds towards rural‐based SCIs. The research is useful to both financing organizations based on interest‐free principles also small and cottage industry owners in developing as well as developed nations, where the Shariah‐based IFS is working.

This study examines empirically the stability of the demand for money under two different financial systems. One system pays interest on money deposited at the bank and charges interest on bank loans; the other does not pay interest on money deposited in the bank, and enters into a profit‐sharing contract with the bank borrower instead of charging interest on bank loans. The first system resembles the western financial system and the second resembles the Islamic financial system. A study by Darrat (1988) studies the behavior of demand for money in Tunisia, and concluded that interest‐free money is more stable than the interest‐bearing money. The behavior of demand for money in fifteen countries has been analyzed in this research in order to find out if the findings by Darrat (1988) are applicable to other countries that practice Islamic banking. This study finds that the velocity of money and its variance are lower for interest‐ free banking system than for interest‐bearing banking system. This result may support the hypothesis that interest‐free money is more stable than interest‐bearing money. The monetary policy implications of interest‐free banking are also analyzed.

The purpose of this paper is to understand interest-free microfinance practices in India, identify issues and recommend possible solutions.

To achieve the proposed objectives, Bait-un-Nasr (BuN) Urban Cooperative Credit Society, located in Mumbai, India, is considered for the case study. The study is based on both primary and secondary data. The primary data are collected through questionnaires and secondary data from various sources. Performance of the institution is assessed in terms of growth and sustainability indicators.

It is found that BuN has been successful in providing interest-free microfinance services in India. A few operational issues have been highlighted and possible solutions are recommended. Moreover, it is found that in comparison to the microfinance industry standards, the performance of BuN has been lower.

BuN is evaluated from only growth and sustainability aspects and not from the aspect of the socio-economic impacts of its services on the lives of customers.

This study would become a documented source of interest-free microfinance practices in India. Moreover, the recommendations provided, if implemented, would help BuN in further growth and development.

This study would help create awareness in the society about the practices of interest-free microfinance.

This paper highlights the interest-free microfinance practices in India that have not received the needed attention. The paper also attempts to identify key issues pertaining to interest-free microfinance with possible solutions.

This paper aims to contribute an Islamic critique of various competing economic system’s theories of interest, which have evolved within the distinct ideological frameworks of distinct rival economic systems and religions from the point of view of discovering potential effective Islamic economic solutions of the interest-driven modern economic, financial and banking and debt crises and the related problems of inflation, extreme, wealth inequalities and extreme poverty.

This historical research paper portrays the chronological evolution of competing narratives and theories of interest in realms of religions, philosophies and rival economic systems for contributing their comparative review and critique from an Islamic point of view in light of the pertinent literature of multidisciplinary history of religions, philosophies and economic thought. It develops an Islamic critique of theories of interest in light of interactions among history of religious thought on interest, history of economic thought on interest and economic theories of interest and the interest-driven economic crises for highlighting potential Islamic interest-free solutions of the modern economic crises in the framework of the Islamic political economy. In light of an Islamic critique of various competing theories of interest, the paper presents pertinent economic policy recommendations for the governments of the countries of the contemporary Muslim world.

The interest-free Islamic economic, as well as banking theories and models, offer the potential practical exploitation-free and injustice-free humanitarian solutions of the contemporary persisting macroeconomic crises (national, regional and global economic crises, financial crises, debt crises and banking crisis). Current Islamic discourses on interest and interest-free Islamic banking have effectively promoted the popularity and growth of global Islamic banking industry in the Muslim world in the 21st century.

Keeping in view a general universal consensus of the Islamic jurists on the elimination of interest of all types from the economy, it is recommended for the Governments of the Muslim countries to implement a consensus-based Islamic banking model, which uses only the Islamic juristic consensus-based Islamic modes of banking and finance – Musharikah, Mudharabah and Al-Qardh Al-Hassan (interest-free loan) – for precluding the possibilities of emergence of controversies about the prospective Riba-free Islamic economic and banking system. Litmus test of the practical success of the interest-free Islamic universal economic and banking system is the successful elimination of all forms of Riba (interest) and all possibilities of its involvement in extractive and exploitative activities in letter and spirit.

This research paper contributes a comprehensive logical and objective critique of various competing prominent theories of interest from an Islamic economic point of view and highlights their pertinent practical macroeconomic problems-cum-consequences as well as the potential Islamic macroeconomic policy responses in the form of interest-free Islamic banking/monetary/fiscal policies.

The purpose of this study is to examine the impact of interest free micro credit loans on the lives and business of the female borrowers.

Both primary and secondary data have been used. Case studies of four different female entrepreneurs have been included as part of the research. The observation was conducted over an extended period of time. Subsequently, interviews were conducted with four beneficiaries to know the role played by interest free micro credit loans in improving (or not!) their lives and businesses.

Interest free micro credit loans played a significant role in bringing a positive change in the lives of the borrowers. Clients mentioned that “zero interest rate” and “flexible repayment schedules” were the main reason for obtaining loans from this source. Further, they suggested that there is a need for training/workshops, feedback/monitoring, networking and online repayment system to make interest free micro credit loans more successful.

The focus of the study is limited to only four female borrowers in Karachi. Future studies can include other cities and cross-gender comparisons for better understating.

This study will help microfinance organizations to assess the problems faced by the borrowers; it will also shed light on the motivations of borrowers.

Interest free micro credit loans were provided to women entrepreneurs in a social experiment and implications were observed.

The purpose of this study is to understand the operations of interest-free microfinance institutions, find the issues and recommend possible solutions in the Indian context.

This paper is based on the case study of Sanghamam Multistate Cooperative Credit Society. This research uses both primary and secondary data. The institution is assessed in terms of two major performance aspects, namely, outreach indicators and financial performance indicators. A brief comparative study of Sanghamam with the aggregate performance of the Indian microfinance industry has also been included.

It is found that Sanghamam has been successfully providing interest-free microfinance services in India. The performance of Sanghamam on selected industry benchmarks is in line with the performance of the Indian microfinance industry. However, a few issues such as potential liquidity risk, lower penetration in the poorer sections of the population, Shariah issues in the method of determination of service charges on demand loans and in the structure of group deposit scheme and profit-sharing business loans have been highlighted.

Sanghamam is evaluated from only outreach and financial performance aspects and not from the aspect of the impacts of its services.

This study would help in documenting the operations of Sanghamam. Moreover, the recommendations provided, if implemented, would help Sanghamam in further growth.

This study would help create awareness in the society about the practices of interest-free microfinance.

This paper highlights the interest-free microfinance practices in India that have not received the needed attention. The authors have discussed the key issues related to the interest free microfinance and recommended the possible solutions.