Prospects And Challenges Of An Interest-Free Economy In Kerala: A Statistical And Policy-Based Analysis

Abstract

The concept of an interest-free economy, rooted in Islamic financial principles, has gained global traction as an ethical alternative to conventional interest-based systems. This study examines the feasibility and prospects of implementing an interest-free financial system in Kerala, India—a state known for its high literacy rates, economic progressiveness, and significant Muslim population. Employing a mixed-methods approach, the research integrates empirical data analysis, statistical modeling, and stakeholder perspectives to assess public awareness, perception, and readiness for an interest-free economy.

Key findings indicate that the public’s support for small businesses, financial inclusion, and social equity strongly favor the introduction of interest-free finance. However, regulatory barriers and a lack of awareness remain major challenges. The clustering analysis identified three distinct respondent groups based on awareness and willingness to adopt interest-free finance. This study suggests that targeted policy reforms and awareness campaigns can make Kerala a model for ethical and inclusive financial practices in India.