Model of Riba-Free Bank

A riba-free model of commercial banking may take many forms but the unalterable conditions to fulfil are that all the components of the model remain Islamically acceptable, role of financial intermediation is efficiently performed and the needs of the economy are adequately met.

In developing an Islamic model for a commercial bank, the following broad areas need to be taken care of:

  • Need for Shari‘ah advisory board and Shari‘ah committees.
  • Modes of financing to be used by banks:
    • Structure of banks’ deposits
    • Profit-sharing arrangement with depositors
  • Need for Islamic instruments for banks’ secondary reserves.
  • Central bank’s role as “lender of the last resort.”
  • Inter-bank flow of funds.
  • Provident fund balances of the employees.
  • Problems relating to foreign branches of Pakistani banks.


Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.
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