The evolutionary theory of Islamic banking: from justifying the interest rate to theorizing the ideal model

This paper tries to evaluate the evolution of the Islamic banking theory. For this sake, the most important current approaches in theorizing Islamic banking is analyzed. These approaches include: coming up with new interpretations about the concept of Riba and banking contracts, justifying the banking activities based on necessity principal, Riba-free banking, Islamic banking and finally theorizing the bank as an institution in the context of Islamic economic system.
The results, which are based on an analytical-descriptive approach, show that: firstly, none of the above-mentioned approaches can be chosen because all of them face some challenges; secondly, although theorizing the ideal model of Islamic banking and economics is extremely desirable, but one should not forget that coming up with the ideal model is a hard work and it needs lots of research. However, it is a must for Islamic thinkers to work on this issue and try to shed lights on this ideal type; Thirdly, in practice, the Islamic societies cannot wait until the ideal model of Islamic banking and economics is found. Hence, the Shariah should be implemented in as much as possible. Finally, it seems that the best approach is to start with Riba-free banking and try to gradually reach the ideal model