Abstract
This study examined the growth and development of interest free banking in Pakistan. This study also analyzed how economic stability can be achieved in the system of interest free banking. This study showed how state bank of Pakistan is playing role for the development of interest free banking. The secondary source of data of GDP per capita, investment, consumption and inflation covering the time series period 1973 to 2014 is employed. OLS technique and Unit-Root-Test has been used. The main idea of this paper is that how economic stability can be achieved in interest free banking. The Holy Quran clear that interest earning is unlawful it has been also cleared by many economist that due to interest rate economic disability can caused. Interest free banking was introduced in Pakistan in 1980 for the first time. This study showed that interest is forbidden by Sharia and Islam promotes investment and consumption. This paper helps to policy maker how development of Islamic banking can be achieved in Pakistan.
Keyword(s)
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