THE ORIGIN AND EVOLUTION OF ISLAMIC BANKING
A brief study
Submitted to: Ustad Zaid Alavi Hudawi M.phil.
By: Muhammed Thufail Pk Ad no: 1245
Islamic banking emerged as a practical reality and started functioning in 1970s. Since then it has been growing continuously all over the world. Presently, Islamic banking industry has reached US$1.0 trillion US dollars by the end of 2008. International Rating Agency, Standard & Poor estimates that Islamic financial industry has potential to grow to US$4.0 trillion over medium term. It is surprising to note that global conventional banks like HSBS, Standard Chartered Bank, Deutsche Bank, Citibank, etc, have also set up separate Windows/Divisions to structure Islamic financial products and are offering Islamic banking services to their Muslim clients and even to those non-Muslim clients who are interested in profit and loss sharing (PLS) financial instruments. UK, France, China, Singapore and many other countries have developed special regulatory to facilitate the working of Islamic banking.
EVOLUTION OF ISLAMIC BANKING
Before the dawn of Islam, the Makka, the Holy city of Arabian Peninsula, was the centre of world trade and regarded as a safe haven for investors and business people. Traders caravans used to make two trips-north and south- to and from Makka during the summer and winter. Amid this relative security and local prosperity in trade and business, it was obvious that primitive system deposits and the utilization of money shall appear in preIslamic Makka society. Mostly goods are exchanged on bartered basis while payments also made in Dinar and Dirham coins. Dinar coins were in gold while Dirham coins were in silver. The business of money changing was common. Similarly, lending money on interest (Riba) was also common in Arabian Peninsula. The Jews of Medina, Banu Nadir, monopolized local business. They lend money to local people and charge high rate of interest. It was their main source...