A Brief History of Islamic Finance

 

A Brief History of Islamic Finance
Irfan Shahid
A judicious study of the literatures available on Islamic Finance suggests that Islamic Finance theoretically emerged in India. Many scholarly writings found on Islamic economy and finance before 1950s were written by Indian Scholars like Maulana Hifzurrahman Shiharvi, Manazir Ahsan Gilani and Maulan Maudoodi. Many contemporary scholars, thinkers and writers on Islamic Economics and Finance namely Prof Khurshid Ahmad, Dr Umer Chapra, Prof Najatullah Siddiqui, Dr Fazlur rahman Faridi and Sunderjan were born in India. Though after the partition these people migrated to various parts of the world but by are of Indian origin. Their contribution in the field of Islamic Finance is a milestone. A number of Islamic Financial Model depends on the theory and suggestion of these scholars. Historians of contemporary Islamic Finance claim the establishment and evaluation of Islamic Finance to the birth of MitGamer Credit Cooperative Society in Egypt and Tabung Haji in Malaysia in 60’s and 70’s. Later on Mitgamer Credit Cooperative merged with Nasir Social Bank. In 1975 Islamic Development Bank was established in Jeddah with the support of OIC and some Arab and Asian leaders. Islamic Development Bank is very similar to World Bank but the nature of its operation is different from IBRD. The establishment of Islamic Development bank was a significant major achievement in the field of Islamic Finance. In the private sector, Dubai Islamic bank was founded in 1975. After the foundation of Dubai Islamic Bank, many Islamic Financial Institutions and banks mushroomed in MENA and Gulf. Due to growth and expansion in the business of Islamic Finance a financial regulation was badly needed which was later met by the establishment of AAIOFI and ISBFI. Both Institutions drafted regulation to regulate the financial institutions and banks with the help of Bankers and Islamic Finance experts. Likewise Islamic finance reached more than 72 countries of the world within a time span of 20 years. Malaysia, Bahrain, Dubai, Qatar and UK want to become a hub of Islamic Finance. Giants of Finance Industry like Morgan Stanly, HSBC, CITIBANK, Merrilinch, Goldman Sache have opened a window for Islamic Finance Customers. All the major banks in the world have a business in Islamic Finance. Currently more than 500 financial institutions domiciled in MENA, GULF and Europe is engaged in the business of Islamic Finance. The annual growth of Islamic Finance Industry is 15% to 20 %. Islamic Finance Industry constitutes more than 25% asset in total financial wealth around the globe.

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