Why interest charges are forbidden in Islamic banking?

Why interest charges are forbidden in Islamic banking?

By Dr Hanudin Amin

Beginning 1983, banking business in Malaysia had witnessed a new development of Islamic banking where interest (riba) was banned for the first time in the nation when the first Islamic bank, Bank Islam Malaysia Berhad (BIMB) was introduced.

One of the golden features of the Islamic banking business is the prohibition of interest in financial transactions. Literally, interest means over and above a thing, be it in money terms or in physical units of goods. In Islamic banking, however, interest means over and above the principal loaned out for a period.

This article explicates four reasons pertinent to the prohibition of i...