Islamic Banking and Economic Development

Abstract

This paper theoretically investigates the effectiveness of Islamic banking & finance concepts and concludes that in addition to the traditional prohibitions, Islamic banks should be aware of the immoral defrauding and selfish sales behaviour that took place in Western financial institutions, which only protected banks’ interests and the bonuses paid to management. In addition and through discussing developed countries banking practices in the 19th century, it has been concluded that the Islamic PLS (profit and loss sharing) contracts would have helped accelerate economic growth by its force of directing funds into profitable industries that increases banks’ cash flows and market confidence.