A.L.M. Abdul Gafoor, Interest-free Commercial Banking , Apptec Publications, Groningen, 1995. Interest plays a central role in the Western monetary system. This is the subject matter of the two books reviewed here. In the resulting banking system depositors entrust their money to the bank for safe-keeping and permit the bank to use their funds to grant loans. Capital is guaranteed but no interest is paid.
Borrowers obtain their loans through the bank and they pay a fee for the services provided the bank.
Banks in this system are service providers, whose main income is the fees they charge for the service they provide. In the above mentioned system there is no mechanism by which income is generated for the depositors. To this end, Islamic banks have invented the concept of participatory financing. In this concept, the bank, using the money entrusted to it by depositors, participates in an enterprise. It is a partnership between entrepreneur, bank and depositor, in which all risks are shared.