Banking beyond collateral: Islamic financing offers new dimenssions in development

Though the concept of distributive justice has swept the Western world, third world countries are still grappling with institutional flaws that preclude the success of social welfare measures. Because of historical problems, the banking systems in many developing countries are not conducive to the distribution of wealth. The problems of distribution have been exacerbated by the recent growth experiences of these nations. According to the principle of Adl, communities have the responsibility to protect their less fortunate members. Banks must broaden their requirements for collateral in order to encourage the economic participation of the poorer classes in society. Among other reforms, the nature of deposits must change in the banking system. Moreover, banks must emphasize local development in their activities. Banks play an important role in assisting developing countries persue distributive justice.