Assalaam Alaikum Hiba_islam,
Yes it is, as it is one factor by which Capitalism maintains a false rate of growth, by factoring in increase in prices not based on Market forces or supply and demand. The interest rate is a way for already rich people, to increase their wealth without having any productive/constructive basis for business or the economy, by lending "capital" for business growth, however, its return is gauranteed even if the performance of the business it was lent to does not perform, exploitation. This in short is why you see people bankrupted while the "fat cats" smile all the way to the bank.
Interest also leads to hoarding and prevents re-investment in to all aspects of an economy, stiffling the creation of jobs, human and social development.
There is a very good report by the Islamic Development Bank which proves why there is no need for interst rates for development. Sadly, for some reason this study of theirs is pne of the hardest to find on their site, suppose they have moved on from this, I had a copy too, but its on my London comp and am at the moment in Dubai :-( In fact one thing to point out is that what we now know as Capitalism has been hijacked by free market economists, namely Milton Friedman, who have taken this aspect of captialism to an extreme and based their hypothesis on exisitng rich nations, the old and new Imperialist ones; UK, U.S. maintaining their wealth without using these old crude methods, but refining them so we don't see them.
Anyway, as you can see this is a very brief, simplistic answer to why Interest is banned not just in Islam but all Monotheistic religions and you really need to read a few indepth studies to comprehend why Interest is not only detrimental, but unneccessary.
A few links are provided for further research by yourself:
www.isdb.org
www.aaoifi.com
www.ifsb.org
These will also show you that Islamic Finance is Alhamdolilah doing very well and inshAllah will do so, of course they do have a bit of an advantage in that their success has been gauranteed by Allah
Sadly at the moment, I.F. is top heavy and heavily corporate finance based, with retail banking not that strong even in existing Islamic Countries, however, some sort of ISlamic Finance is available worldwide and at all levels, e.g. Lloyds does ISlamic Finance now through its whole network in UK, a larger network so far than the Islamic Bank of Britain. So you can search for such an institution near you on the net and give them a call. (if you need help on this, let me know know a few online Directories , but a generic search on google would prove enough in the meantime I think.)
Hope the above helps.
Fi amanAllah
