Islamization of the Contemporary Banking System: Need, Significance, and Impacts

عصرِ حاضر میں بینکاری نظام کی اسلامی تشکیل: ضرورت، اہمیت اور اثرات

Abstract

In the modern era, the banking system plays a central role in economic development at both national and global levels. However, the prevailing conventional banking system is largely based on interest (riba), which is strictly prohibited in Islam due to its unjust and exploitative nature. This situation poses serious religious, moral, and economic challenges for Muslim societies. As a result, the Islamization of the contemporary banking system has become an urgent necessity. This article explores the need, importance, and practical requirements of restructuring the modern banking system in accordance with Islamic principles. It discusses the fundamental differences between conventional and Islamic banking, highlighting key Islamic concepts such as prohibition of interest, risk-sharing, asset-backed financing, and ethical investment. The study also examines the role of Islamic banking in promoting economic justice, financial stability, and social welfare. Furthermore, it identifies practical challenges in the implementation of Islamic banking, including regulatory issues, institutional capacity, and public awareness. The study concludes that the Islamic transformation of the banking system is essential for establishing a just, ethical, and sustainable financial system that aligns with the objectives of Islamic law and meets the needs of contemporary society.