Without Interest there is not business. Only barter between bronze age goat herders.
Let's say you want to start an offshore facility for growing, harvesting, and processing algae into bio-fuel. You need 100 million to cover startup costs. You only have 10 million. We provide the 90 million and have a 90% equity stake in the company/venture. A combination of a major well turning out to have less oil than expected and a liberal government in Canada passing environmental regulation makes the price of oil go up 10%. The value of the project goes up based on speculation and Shell buys you out for 140 million. Our equity share is 126 million and yours is 14 million.
We both made 40% on our money without interest. Alternately, if you don't want to sell out to Shell, you can pay us back at the rate of 500,000 a month. With every payment you are buying our equity, in this case with the profits resulting from the successful project.
Now if a massive storm comes and destroys the value of the facility, the loss is distributed evenly to all equity holders. Our remaining equipment is worth 60 million, and you sell it to someone who wants to start a new project with improved technology but needs your ships and helicopters. We get paid back 54 million, and you get 6 million back, each of us taking a 40% loss.
This way you can concentrate on modernizing a your factory producing biofuel from organic waste, putting your expertise to use in expanding this already existing project with your remaining capital. We hopefully have a diversified enough investment profile to absorb the loss, and we carry on, having learned to be more cautious with this type of project.
A traditional bank would have continued to demand the same principal back on their loan, and then we could seize other assets based on your inability to pay off the loan. We would seize your other factory, and it would sit vacant for months with the machinery rusting while we looked for a buyer to recover part of our losses. In other words, the lender loses, and society loses, and the bank, and the depositors of the bank (proportionally, mostly the ultra wealthy) win.
In this way, wealth concentrates and people display their wealth with designer clothes, sports cars, yachts, and luxury apartments in Paris with expensive paintings, leading to resentment as the growing underclass gets put down by the wealthy, leading to social tension. This social tension also builds between countries, as the tendency of accumulation built in to interest favors not only rich individuals but rich countries. This lead to conflict over migration as people try to move to rich countries to work, and to try to climb the social ladder. The rich get richer, poor get poorer, and tension builds until finally countries go to war. Wartime and rationing stimulates growth, and destroying countries generates an economic boom when the destroyed countries have to be rebuilt. The boom lasts for a while, and the process begins again.
Why is it that when financial crises begin, the solution is always to lower the interest rate, leading to more investment and job growth?
This is a practical example of how demurrage, or a negative interest rate saved the economy of a small town in the great depression, until the currency was shut down by the central bank.
http://www.lietaer.com/2010/03/the-worgl-experiment/ If you read this article, you will also see how Zakat, one of the 5 pillars of Islam, is a form of demurrage.
http://en.wikipedia.org/wiki/Demurrage The way that the current boom-bust-crisis-war cycle has been intensifying with each repetition, (World War I, World War II... and then) if we continue with the interest based system, we will be lucky to have an economy based on goat herding.
In other words, supporting the conventional banking system by keeping deposits in it or charging interest is like participating in murder, because it leads to violence. While it may look like a gain in the short term, it is actually a loss if you look at the long term.
Following the divinely mandated system of Sharia will lead to peace and prosperity in this world and in the hereafter, insha'Allah.
So whosoever receives an admonition from his Lord and stops eating Ribâ (usury) shall not be punished for the past; his case is for Allâh (to judge); but whoever returns [to Ribâ (usury)], such are the dwellers of the Fire - they will abide therein.
Allâh will destroy Ribâ (usury) and will give increase for Sadaqât (deeds of charity, alms, etc.) And Allâh likes not the disbelievers, sinners.
Truly those who believe, and do deeds of righteousness, and perform As-Salât (Iqâmat-as-Salât), and give Zakât, they will have their reward with their Lord. On them shall be no fear, nor shall they grieve.
O you who believe! Be afraid of Allâh and give up what remains (due to you) from Ribâ (usury) (from now onward), if you are (really) believers.
And if you do not do it, then take a notice of war from Allâh and His Messenger but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums).
And if the debtor is in a hard time (has no money), then grant him time till it is easy for him to repay, but if you remit it by way of charity, that is better for you if you did but know.
And be afraid of the Day when you shall be brought back to Allâh. Then every person shall be paid what he earned, and they shall not be dealt with unjustly.
Holy Quran, Surat Al Baqarah (The Cow), verse 275-81
