Comparison of Islamic and Conventional Banking Systems in Islamic Economic Thought 1960-1980 Period

Abstract

This study examines the comparison between Islamic banking and conventional banking systems from the perspective of social justice within the framework of Islamic economic thought during the period 1960-1980. The main focus of this research is to emphasize that social justice has served as both a philosophical and operational foundation of the Islamic banking system since its early development, in contrast to the conventional banking system, which is based on interest and oriented toward capital accumulation. This research employs a qualitative, literature based approach through the analysis of relevant sources concerning the history, operational principles, and dynamics of both banking systems. The findings reveal that Islamic banks offer profit sharing mechanisms, transparency, and proportional risk distribution, making the system more inclusive and capable of strengthening social solidarity. Conversely, conventional banks tend to create economic disparities due to interest based practices that place a greater financial burden on economically vulnerable groups. The novelty of this study lies in highlighting that between 1960-1980, Islamic economic thought had already developed systemic innovations rooted in social justice innovations that were not merely normative but offered concrete alternatives to the structural shortcomings of the conventional banking system. This research contributes to enriching the literature and provides a foundation for developing Islamic banking policies that emphasize social justice as a central pillar of sustainable economic development.