Abstract:
One of the most emerging trends in global economics is the idea of interest-free banking and
finance. Interest-free banking in the global landscape has emerged as an alternative banking
system. It was established based on the ethos and values of Islam and is governed by the rules of
Sharia law. Ethiopia is actively working for financial inclusion, especially under the country’s
financial inclusion policy, which focuses on the inclusion of Muslim interests in financial
institutions. This has begun with permission given for interest-free banking, followed by Islamic
insurance, and now interest-free microfinance. The government introduced interest-free banking
in 2011 by enacting two directives: 1) the Directive to Authorize the Business of Interest-Free
BankingNo.SBB/51/2011; and 2 the Directive to License and Authorize Interest-Free Banking
Business No.SBB 72/2019. In addition, these directives oblige the application of Islamic laws for
interest-free banking transactions. The aim of this research is to investigate the legal framework
for dispute settlement of the interest-free banking regulation in Ethiopia in line with Islamic
perspectives. By using comparative methods of analyzing rules, this research has investigated
and analyzed legal deficiencies. Furthermore, the study employs non- doctrinal methodology to
identify the practical procedure for dispute settlement in interest-free bank in Ethiopia. The
author has found that the existing legal framework is not adequate to settle disputes in the case
of interest-free banking, Interest free banking dispute settled by conventional laws which are
against Islamic finance principles and a dispute settlement mechanism for interest-free banking
is not included in Ethiopian banking regulations. As a result, the author recommended major
points in order to provide a solution to the major legal problems identified by this research that
surround dispute settlement of interest-free banking, as well as making a solution to dispute
settlement of interest-free banking in Ethiopia.
