Saudi Arabia's Islamic Growth Model: Applications to Monetary and Banking Policy

Abstract

Perhaps no other area of Islamic economic thought has been more misunderstood than that concerning the role of the rate of interest. Any economic system concerned primarily with the welfare of the individual must not only encourage allocative efficiency, but~also promote economic growth if it is to avoid social injustice, economic stagnation and widespread unemployment. 1 The method of state allocation utilized in the eastern block countries is one' possible way of avoiding the widespread use of interest rates. Given that complete or near complete socialization of the means of production that this system requires is contrary to the individualistic moralistic philosophy of Islam, the Saudi government is, given its concern for the welfare of the economy, left with little choice but to somehow direct savings through the organized capital markets to the private sector.