History of Islamic banking

Classical Islamic banking
Main article: Islamic economics in the world
Further information: Early reforms under Islam and the Islamic capital

During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate, [1] where a market economy and a rapid early form of mercantilism were developed between the 8th century 12th, which some call "Islamic capitalism". [2] A vigorous monetary economy was created on the basis of levels of expansion of the circulation of a stable currency, high value (the dinar) and the integration of currency areas that were previously independent.


A number of concepts and innovative techniques have been introduced in the Islamic bank, including bills of exchange, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the first forms of capital (al mal), capital accumulation (nama al-mal) [3], checks, promissory notes, [4] trusts (see Waqf), startup companies, [5] transaction accounts, loan, ledgers and duties. [6] The business structure is similar to corporations independent of the state are also in the medieval Islamic world, while the agency institution was also established during this period. [7] [8] Many of these early notions of capitalism have been adopted and developed in medieval Europe from the 13th century [3].
[edit] Riba

The word "Riba" means excess, increase or more, which correctly interpreted in the terminology of the Shariah, implies overcompensation without due consideration (consideration does not include the time value of money). The definition of riba in classical Islamic jurisprudence was "surplus value, without consideration." Or "to ensure the equivalence of the real value" and that "the numerical value is irrelevant." During this period, the currencies of Gold and silver were the metals of reference that defines the value of all other materials exchanged. Application of interest to benchmark itself (ex natura sua) has no logical sense that its value remained constant compared to all other matters: these metals may be added, but not created (from scratch).

Of interest to apply is acceptable in certain circumstances. Currencies that were based on a guarantee by a government to honor the specified value (ie currency) or based on other materials such as paper or base metals have been allowed to have interest applied to them. [9] When the currencies of base metals were first introduced in the Islamic world, no jurist ever thought that "pay a debt in a higher number of units of that currency was riba" as they were concerned about the real value of money (determined by weight only) rather than the numerical value. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars to equal a total weight (ie, the value in terms of weight should be the same because all brands of coins not weight is not exactly like).
[edit] Modern Islamic banking

The modern experience of first Islamic bank was undertaken in Egypt under cover without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism which was anathema to the political system. The pioneering effort, led by Ahmad Elnaggar, takes the form of a savings bank based on profit sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 1981), when there were nine such banks in the country [10].
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In 1972, the MIT project Ghamr savings is in Nasr Social Bank, which until now is still active in Egypt. In 1975, the Islamic Development Bank was created with the mission to provide funding for projects in member countries. The first modern Islamic banking, trade, Dubai Islamic Bank, has opened its doors in 1975. In the early years, products offered were basic and heavily based on traditional banking products, but in recent years, the industry is beginning to see strong growth in new products and services.

Islamic banking is growing at a rate of 10-15% per year with signs of future growth consistent. [11] The Islamic banks have more than 300 locations in 51 countries including the United States by such companies as the basis of the University of Michigan Bank, and a further 250 mutual funds that comply to Islamic principles. It is estimated that over U.S. $ 822 billion in Shariah compliant assets of the world are managed according to The Economist. [12] This represents approximately 0.5% of estimated world total assets in 2005. [13] According to CIMB Group Holdings, Islamic finance is the segment the fastest growing global financial system and Islamic bond sales may increase by 24 percent to 25 billion dollars in 2010 [14].

The World Islamic Banking Conference, held annually in Bahrain since 1994, is recognized internationally as the largest gathering and the largest banking and financial leaders in the Islamic world.

The Vatican has suggested that "the principles of Islamic finance may represent a possible cure for ailing markets." [15]
[edit] The largest Islamic banks
See also: Islamic Development Bank

Shariah-compliant assets reached approximately $ 400 billion worldwide in 2009, according to rating agency Standard & Poor's Rating Services, and the market potential is 4 billion dollars. [16] [17] Iran, Saudi Arabia and Malaysia have the most assets in accordance with sharia. [18]

In 2009, Iranian banks represented about 40 percent of total assets of top 100 global Islamic banking. Bank Melli Iran, with assets of $ 45.5 billion, came first, followed by Al Rajhi Saudi Arabia's Bank, Bank Mellat with 39.7 billion dollars and Bank Saderat Iran with $ 39.3 billion .