The Islamic banking today has become most popular and reliable financial system in the world.
The history and evolution of Islamic Banking dates back over 14 centuries ago to the origins of Islam when the Holy Quran was first revealed to Prophet Mohammed (PBUH), hence encompassing a complete set of rules and regulations for all aspects of life put forth in the Holy Scripture and authentic recordings of the Prophet’s traditions.
The issue of interest free banking came to the attention of Muslim Intellectuals in the 1940's and 1950's. By this time economic and financial influences had produced a number of local and national banks established along the lines of interest based foreign banks. They had started to bring the banking system and its services to the local population. By this time Governments of Muslim countries, particularly those, which gained political independence, had of necessity to engage in international financial transactions using banking systems. The requirement for commercial banking was recognised. The challenge was to avoid the concept of interest within commercial banking. The route to this was the development of the concept of profit and loss sharing (Mudarabha), the key concept from which the structure of most Islamic Banking products and services are derived.
The first interest-free bank, the Dubai Islamic Bank was established in 1975. .A few others followed in Sudan, Egypt and Kuwait in the late 1970's.Apparently a number of earlier interest free banking ventures were initiated in the 1940's/50's and 60's in a number of Muslim countries but they did not survive or did not survive in strictly Islamic Banking form.
Most private Islamic Banking have been established in Muslim countries. However, a number have been established in western Europe and, indeed, a number of well know international...