Alternative Monetary System Mechanism to Control Inflation: Islamic Monetary Policy Perspective

Although as claimed in some jurisdictions, interest based monetary policies have proven to be a powerful instrument to control inflation, this is not without insurmountable number of its limitations. Accordingly, arguments were made on merits of Interest Free Monetary Policy IFMP, or interest-free banking, which derives its origin from revelations in Qurʾan, the words of Allah (May He be exalted), and the traditions of Prophet Muhammad (peace be upon him). This paper seeks to present an alternative approach viewed from Islamic monetary system lenses to manage inflation through a synthetic review of an alternative interest free (Islamic) framework for tackling inflation. In the end, the paper took a position highlighting the advantage of Islamic monetary policies as the more effective route to managing inflation. The paper is however limited in its present form by lack of available empirical data covering a reasonably long period of time across different jurisdictions to indicate the outcomes of adoption of the discussed interest free monetary tools. As a contribution from this paper, it views the current scourge of global inflation presenting a demand for a radical departure from the status quo approach to its management.