ISLAMIC ECONOMIC SYSTEM - ATTITUDE TOWARD INTEREST RATE

This study is focused on basic theological, theoretical and practical principles of the Islamic economic system. It points out the importance of the source (Qur'an and Sunnah) on which the Islamic economic system is based; it extracts the strength of its moral and ethical values from these sources, thus creating a framework for just and fair participation and functioning of an individual in the Islamic social community. The study also points out the key properties and characteristics of the Islamic model of a man who, with his dualistic nature, participates in everyday economic life by making choices between good and evil, just and unjust, etc. The study provides analysis of justice and fairness which are constituent parts of the concept of total moral and social values that guide an individual in an effort to prevent this person from exceeding the boundaries of what is allowed according to Islam. This paper is also focused on trust, the most important element of social capital in Islam and Islamic economy, and the importance of Sharia law as the fundamental Islamic law based on the concept of justice, trust and reliability. One chapter of the study is specifically focused on the prohibition of interest. It provides a historical overview and emergence of Usury and interest rate. Throughout history there have been examples of prohibition of the interest rate in monotheistic and other religions and social communities. Special attention is given to prohibition of interest (Riba) in Islam, and the reasons for the existence of the conventional interest rate are compared with attitudes that Islam has toward these elements.