The collection of an extra amount by the lender at a fixed rate on a loan given by him from the debtor is called Interest. There is a big great deal of difference between business and interest. In a business the individual invests money and gains profit in return. But merely investing his capital is not sufficient.

The person involved in the business venture, be it agriculture or industry, has to work hard day and night even after investing huge sums of money in it. Finally, even after all this monetary risks and hard work there always exists a fear of loss in this venture.

Contrary to this, in Interest dealings, the lender lends his money at a fixed rate of interest and collects a regular profit from the borrower in the form of interest without any physical effort or fear of loss and also irrespective of the economical condition of the borrower.

In a business transaction the entrepreneur gets a profit only once out of a particular deal, whereas in interest dealing, the lender goes on receiving profit for the money that he had once lent, with an increase in it as time goes by. Islam very strictly prohibits all kinds of interest dealings. The impact of interest on the lender as well as the debtor is highly disastrous. The lender becomes extremely materialistic and wild after his greed for money.

He does not bother about the consequences of the system of interest on the society. He forgets human relationships and kindness. He becomes wealthy by pushing innumerable people into the darkness of poverty. That is why the Holy Qur'an has compared them to mad and foolish people in Chapter 2, Verse 275. The borrower on the other hand loses whatever goods he possessed with him in the process of repaying the loan and finally ends up paying an amount that is many times more than what was actually loaned to him.

It is also observed that often, even after the death of the borrower many successive generations come to pass but are still unable to repay the loan taken by their ancestors due this concept of Interest. Interest Free Banking Countering the unjust and unharmonious financial systems, Islam laid down its own economic and financial principals with greater emphasis on interest free banking.

Islamic banking is not merely a business but also a mission for attaining economic equity. This system will not allow concentration of wealth to take root at any cost. The most prominent feature of the Islamic financial system is that, it forbids the charging of Riba (Interest) on money lent.

Islamic banking, based on the Qur'anic prohibition of charging interest, has moved from a theoretical concept to embrace more than 100 banks operating in 40 countries with multi-billion dollar deposits worldwide. Islamic banking is widely regarded as the fastest growing sector in the Middle Eastern financial services market.

Exploding onto the financial scene barely thirty years ago, an estimated $US 70 billion worth of funds are now managed according to Shari'ah (Islamic Law). Deposit and Principles assets held by Islamic banks grew to a whopping 60 billion dollars in 1994 as compared to a meagre 5 billion dollars in 1985.