Islamic banks are issuing loans without interest to this day. They have a clever fee schedule though, and I'm not sure it works out any differently for the borrower at the end of the day.
There was a Planet Money episode [1] where a bank setup a no-interest loan to a Muslim family because Islamic law prohibits charging interest.
In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.
In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.
[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...