The comparative role of banking in binary and Islamic economy

Purpose – The purpose of this paper is to set out the role of banking in a binary and Islamic economy. Design/methodology/approach – By comparison, the paper shows that the main requirements for such an economy, although superficially similar, differ from the realities of “free market” finance capitalism. The paper goes on to explain how, in a binary and Islamic economy, commercial banks would be the means by which interest-free loans, coming from the central bank and ummah and directed at various forms of productive capacity, would be introduced. Findings – There is no difficulty in using the banking system to introduce the binary and Islamic economy. However, a paradigm issue is involved. Practical implications – The central bank-issued interest-free loans implemented through the commercial banking system loans serve the ends of both binary and Islamic economics in that they enhance the real economy and forward social and economic justice. Originality/value – The paper shows how use of these loans is a new concept with a power to change the whole of the economy and society in a beneficial way.