Islamic Banking and Finance: Fundamentals and Contemporary Issues by Salman Syed Ali and Ausaf Ahmad

Islamic Banking and Finance: Fundamentals and Contemporary Issues

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Islamic jurisprudence (Shariah) explicitly prohibits interest (riba) in all its manifestations. Islamic Banking and Finance in modern times grew out of the Muslims’ desire to find out the ways and means to fulfil their financial requirements in view of prohibition of interest. Interest based finance had become the dominant system during the colonial period, and continued to be so in many Muslim countries even after their independence. In this backdrop Muslim intellectuals and economists started to write about Islamic economics and financial system, notably in the Indian Subcontinent and Egypt.1 The early writings expounded the philosophy and the concepts of interest-free finance along with its effects on the socio-economic welfare of the society. During that era commercial banks had occupied centre stage of the finance industry in mobilization of savings and providing of loans. Naturally, the first models of Islamic finance purported to explain how a banking system could work without interest.2 These theoretical models perceived two tired mudarabah finance structure, in which the Islamic bank on one hand would receive deposits as agent (mudarib) of its customers; and on the other hand provide finance to enterprise as principal [sleeping partner] (rabb al-mal). In this early period (1930s to 1960s), developments in Islamic finance took place on the intellectual side only. The first practical realization of a bank-like Islamic financial institution, on a small scale, was that of Mit Ghimar in Egypt which started in 1963 and closed down in 1967. Another independent experiment of Islamic finance started in Malaysia in the form of Shari[ah compliant savings and investments scheme for prospective pilgrims (hujjaj) called Tabung Haji. The experiment remained unknown in the academic circles only to be discovered much later and recognized in the 1990s as a successful institution.
In the 1960s and early 1970s the developments were mostly on the theoretical plane devoid of any practical experimentation. However, the accumulated theoretical knowledge prepared the ground and developed sufficient collective will for the emergence of first Islamic banks one in private sector (Dubai Islamic Bank) and another as a multilateral organization (Islamic Development Bank) both of which came into being in the early 1970s. Many more Islamic banks and financial institutions were created in the following years (for details see Ahmad 2000). A combination of practical realities of the business and constraints of the regulatory environment forced the Islamic banks to rely mostly on murabahah and leasing contracts for the financing activities instead of the originally conceived mudarabah contract in the second tier. So much is the use of murabahah that some authors referred to this practice as murabahah syndrome3.

Judul E-Book : Islamic Banking and Finance: Fundamentals and Contemporary Issues

Bahasa : Inggris
Penulis/Penyusun : Salman Syed Ali and Ausaf Ahmad

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Format File : PDF

Ukuran : 2,6 MB

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Karya terbitan IRTI IDB ini adalah kumpulan dari paper-paper pilihan dari konferensi ekonomi Islam internasional yang diselenggarakan di Brunei Darussalam dengan topik utama sesuai dengan judul bukunya, fundamental dan isu-isu seputar perbankan dan keuangan Islam.

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