historical process of interest in Islam and aspects of participation banks open to criticism

Banks turned to be the most indispensable institutions of today's economic life. There is a consensus, to a large extent, on the meaning attributed to the interest which arises from deposit bank transactions. However, there still exist some debates and reservations especially about the methods implemented by participation banks to extend loans. Accordingly, this study analyzed whether methods employed by participation banks to collect funds and to provide loans were in accordance with Islamic law. Introductory part of the study addressed the objective, significance, coverage and methodology of the thesis and also sources benefited during the study. Moreover, views and approaches in favor of and against interest were summarized in order to present a general perspective on the theme in this part. Next, the first part of the thesis introduced the conceptual framework of the study, and subsequently analyzed the economic practices of the pre-Islamic age of ignorance in order to offer a better understanding of the ban on interest. Later, it highlighted nasses (divine decrees) banning the interest and put particular emphasis on circumstances of the ban on interest. Afterwards, it underlined the rules on interest constituted in the era of the Mujtahid (interpreters) Imams of Islamic law when the fiqh (Islamic jurisprudence) was systematized. Lastly, serving as a primary reference point for today's participation banks, Ottoman cash waqfs (foundations) and their practices in relation to the theme of this study were analyzed in the first part. The second part of the thesis explored the methods employed by participation banks to collect funds and extend loans. In order to identify these methods, contracts posted on the official web sites of participation banks were primarily utilized. In the last part of the study, methods practiced by participation banks for collecting funds and offering loans were evaluated through a holistic perspective on the basis of the fundamental rules of Islamic economic thought. In the end, a final part was devoted to the assessment of results attained through the study.