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History & Development Essay

4310 words - 18 pages

Islamic Banking and Finance: History Development

Slide #1 Some Issues

History Of IBF

Development of IBF -Overview-

2. Islamic Banking and Finance: History and Development
History and Development of IBF in Bahrain

Full Fledged IB vs. IB windows

• Word ‘bank’ comes from the word ‘banco’
- A table or a bench on which Italian money-changers used to display their monies and records and conduct their transactions

History of Islamic Banking and Finance
• Arabic financial and economic system preIslam – Trading based arrangements were common • Bay’ al-musawamah (bargaining) • Bay’ al-muzayadah (auctioning) • Bay’ al-amanah (trust sale) – Al-murabahah (resale with profit) – ...view middle of the document...

•25th July 1963 – February 1967
Mit ghamr Islamic Savings Bank started in Egypt by El-Naggar -Based on German saving bank -Purpose to mobilize the idle savings of the majority of Muslim within the Syariah and to provide halal returns on their saving as well. -El-Naggar was an academic himself -Managed the staff

The role of the bank (El-Naggar, 1974)
a) An efficient intermediary between the supply and demand of capital b) Act as one educational centre for economic efficiency, saving education and banking habit, and c) Set a dynamic factor in mobilizing the idle capital for investment, reducing hoarding and the problem of capital formation

the Number of Depositors and Their Average Deposits in Mit-Ghamr Islamic Saving banks

No. of Year Depositors

Growth in Average Deposit % Per Saver

Growth in %






1966 1967

151998 251152

400 65

5.79 7.28

-1 26

Mit-Ghamr Islamic savings Bank's branches Between 1963-1967 Branch Name Opening Date

1. Mit Ghamr 2. Sharbine
3. Al-Monsoura 4. Dakerous 5. KasrnAl Ayni 6. Zefti 7. Al-Mahallah 8. Misr Al-Jadidah 9. Belqaa

5/7/1963 14/08/1965
11/9/1965 9/10/1965 14/10/1965 9/2/1966 24/07/1966 23/07/1966 1/10/1966

Position of some Islamic Banks among the Top 100 Arab Banks

1980 1981 1982 1983 1984 1985 1986 1987 2000 2001 2004

94 68 51 42 34 39 36 28 24 21 21

66 47 45 43 48 90 95 -



87 85 96 97 -

86 90

87 93 48 48 38



54 58



History of IBAF – (4)
• Islamic banking and finance (IBF) is relatively new compared to conventional banking and finance • Earliest Islamic financial institution can be traced to a savings institution based on profit sharing in Mit Ghamr, Egypt in 1963 • Oil boom in the 1970s triggered a rapid growth of Islamic financial institutions

• Establishment of the first Islamic bank (Dubai Islamic Bank in the UAE) in 1975, as well as the Islamic Development Bank (IDB) in Saudi Arabia
• First attempt in the West to establish Islamic banking was in Luxembourg in 1978

Islamic Banking and Finance Today- (1)
• Islamic scholars have profound influence on the practice of Islamic banking and finance – No equivalence in other religions
• Muslim governments’ approach in relation to IBF differs – Transformation of the entire internal financial system to Islamic • Iran, Pakistan, Sudan

Islamic Banking and Finance Today- (2)
– Embrace Islamic banking as a national policy concurrently with conventional banking and finance (dual track banking) • Bahrain, Brunei, Indonesia, Kuwait, Malaysia, Turkey, UAE

– Neither support nor oppose Islamic banking • Egypt, Yemen
– Actively discourage separate Islamic banking presence • Saudi Arabia*, Oman

History of Islamic Financial Institutions- Overview
1950’s (Pakistan) 1963-1967 (Egypt) 1963 (Malaysia) A small experimental...

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