The Islamic Economic View of Interest Rate

Indeed, interest is a source of problems that lead to economic instability, because the interest rate instrument is an imbalance the real sector and monetary (Wibowo and Widodo, 2005).

The impact of interest rates, especially when economic conditions in the middle become slow due to global financial crisis is the conventional banking operations bear the loss. Because one of the causes can not maintain net interest margin. Banking national push to provide a high deposit interest rate so that the customer does not switch to another bank. On the other hand the conventional banks can not raise interest rates because the loans will be a boomerang, because the demand will go down the credit and increasing credit problems (Non Performing Loans / NPL).

In islamic economic system, particularly the banking sector, does not know the interest rate instrument but uses a system of profit and loss. The repayment of profits earned sharia banking customers is determined by the size of the amount of profits earned from the project is executed. When a business loss, loss will be shared by both parties.