A Comparison of Islamic vs Non-Islamic Financial Institutions in Reducing Inflation in Developing Countries - Examples India and Malaysia (Word DOCX)

Recent studies have shown that despite the trend of globalization catching up in the last few years, banks across different parts of the world control their respective monetary policies differently. A studies of the long term financing structure of the Euro area (except UK), UK, US, Japan, Asia without Japan suggests that countries in Asia have a very strong stock market and weaker debt market, same is the case with UK, the Euro zone except the UK has a very strong debt market but a weak stock market whereas Japan and US have all these markets well developed.

Through the study it was understood that such banks work on an interest free regime, they function on the principle of profit and loss sharing that is ownership in the equity. Through this practice, Islamic Banks aim to curb the inflation which is so rampant in developing countries. According to Islamic scholars, interest based regime is the root cause of inflation. In an interest based regime, the deposit rates are positively correlated to the inflation. As inflation increases the deposit rates also increase.