The impact of interest rate cancellation on the Yemeni economy

Abstract

The research dealt with the impact of canceling the interest rate on the Yemeni economy. This research came after some Yemeni merchants filed a lawsuit before the Constitutional Division of the Supreme Court requesting the cancellation of Article (420) of Commercial Law No. (32) of 1992, considering it to be in conflict with the Qur’anic texts and the hadiths of the Prophet, which prohibit dealing with the bank interest rate, whether taking or giving.

For the purposes of scientific research, the research was divided into an introduction, three axes, and a conclusion. The first axis dealt with the nature of the interest rate by defining the interest rate, its types, and the legal position on the bank interest rate.

The second axis dealt with the nature of the interest rate in the modern era, where the interest rate is taken as a price for renting money from those who need it in exchange for using it for a specific period of time, then returning it to its owner with the interest rate on it. It is also viewed as a mechanism for transferring money from those with a financial surplus (savers) to those with a financial deficit (investors), in addition to other uses included in the research.
The third axis dealt with the impact of canceling the interest rate on the Yemeni economy, and the essential matter in the subject is the immediate cancellation that may be caused by the issuance of the ruling, as there is no disagreement about the sanctity of the bank interest rate considering the union of its cause with the cause of usury mentioned in the Holy Quran and the Sunnah of the Prophet; as it is necessary to gradually remove it from economic transactions in general, and banking transactions in particular, and the research addressed the areas that may be economically harmed as a result of the immediate cancellation of the interest rate without gradual cancellation. The conclusion dealt with the results and recommendations reached by the research, as the results showed that there are several parties that will be harmed as a result of the immediate cancellation of the bank interest rate, starting with the government, the central bank and commercial banks, and ending with foreign capital, and the internal and external economic relations of the government; Because local and international economic transactions at the present time are based on the interest rate, the study recommended that the bank interest rate be abolished in gradual, chronic stages, and that we benefit from the Arab and Islamic experiences that preceded us in this field, such as Sudan and Pakistan. The research also recommended that we benefit from the experience of Islamic banks existing in Yemen, and how more than one option can be taken into account in Islamizing the banking system.