Interest free banking and economic stability

In the last 20 years, Muslim nations have made varying efforts to restructure their economies along Islamic lines. The economy of an Islamic state is similar to the economy of a capitalist welfare state. Justice (al-'adl) is crucial, with 2.5% of people's savings charitably distributed. Although interest rates are important in capitalist financial intermediation, Islam forbids loaning funds at preset rates of return. The Islamic ban on interest is not unique in history; all three major monotheistic religions have to some degree prohibited interest. Banking is like a business in an Islamic economy, as profits and losses are to be shared. An interest-free banking system is in fact consistent with classical economics. It has been tangibly observed that Islamic banking galvanizes wealth well -- Islamic banking in Iran and Pakistan raised the level of private-sector deposits. Pakistan's 1973 constitution called for an end to riba. The nation adopted a gradual approach. Islamic le