History and emergence of Islamic banks

Toward a new understanding of Islamic banking

History and emergence of Islamic banks (2)

Many people consider Islamic banks a modern phenomenon but they did not realize it is essential part of the Islamic economic system which is part of our tolerant `Aqeedah (creed). Therefore, the one who follows the history and emergence of Islamic banks realizes the importance of these banks which had proved their role and presence a day after another and circulated fast.

Indeed, reviving the Islamic banking system was, first, due to those Islamic awakenings which came after liberation of the occupation to which the Arab countries subjected, in addition to increasing the financial resources of most Muslim countries, especially under the consecutive successive oil leaps.

Stages of emergence and development may be noted through the following:

1- Individual initiatives.

2- Initiatives from Governments.

3- Initiatives of international nature.

4- Comprehensive initiatives.

1- Individual initiatives:

The experience of establishing the local savings banks in Egypt in 1963, the first real attempt to start working with an Islamic banking system. It was done by Dr. Ahmad An-Naggar (may Allah bestow mercy on his soul) where such experience was based on legitimate speculation through the collection of personal savings from the people and investing them in an Islamic system which allocates profits according to the signed agreement between both parties.

There were several personal tries in Haydarabad, Malaysia, and Pakistan as well.

2- Initiatives from Governments:

Through the mutual agreement between the Muslim governments or their representatives in support to the establishment and consolidation of Islamic banking system which was a great transition point in support of the Islamic banking notion where the following appeared:

A- Islamic Development Bank:

The Islamic Development Bank was established in 1975 in Jeddah - Saudi Arabia.

It is an international financial foundation for developmental financing, developing the foreign trade, providing the training means, and conducting the necessary researches. All Islamic banks participated in this bank to provide support for the economic development and social advancement to the peoples of the member states  according to the principles of Islamic Shari'ah[1].

B- International Union of Islamic bank:

It was established in 1977 in Makkah and it has a general secretariat in Cairo. It aimed to confirm the Islamic nature and support the bonds and coordination between the Islamic banks' activities[2].

3- Initiatives of international nature:

It is one of the most important stages which contributed in establishing the Islamic banking system and made the dream come true through establishing Islamic banks all over the world, of which:

• Dubai Islamic Bank: which was established in the United Arab Emirates in 1975 and it was the first integrated Islamic bank model.

• Faisal Islamic Bank and Kuwaiti Finance House: 1977.

• Islamic Bank of Bahrin: 1979.

• Abu Dhabi Islamic Bank: 1997.

Besides many other Islamic banks.

4- Comprehensive initiatives:

To Islamize the entire Islamic banking first to prove the ability of Islamic economy and second the Islamic banks to carry out its functions and duties which forced many Muslim countries to change the traditional banking system to entire integrated Islamic banking system such as Pakistan, Sudan, and Iran.

We still see the huge prosperity of Islamic banks and the speed of their circulation to the extent that they do not only exist in Muslim countries but also in other non-Muslim countries. Moreover, we see the opening of Islamic banks or branches of Islamic banks in the most developed Western countries which depend on usury in their financial and banking systems.

Therefore, the number of Islamic banks all over the world until 2008 was (396) in (53) countries and try to attract his attention by the best decoration, and the balance of funding in these banks is estimated by (442) billion dollars, whereas the number of traditional banks which provide Islamic products reached (320) banks and a balance of finance equals (200) billion dollars[3].