1. Introduction
History of Islamic Business Transaction
Without a doubt, the history of Islamic Banking is quite interesting. Since the medieval era (1,000 – 1,500 AD), businesspeople in the Middle East engaged in financial transactions. At this time though, these transactions used the same financial principles as the Europeans.
Early History of Islamic Banking
Since the Arabs of the Ottoman Empire traded extensively with people in Spain, they also developed certain no-interest financial systems that worked on a profit and loss sharing method. These systems, in turn, financed trade and other business affairs. When the Middle Eastern and Asia began to be more important trading ...view middle of the document...
Growth of Islamic Banking
In the following decades, interest in this type of banking continued to grow substantially. Soon, the first widely recognized financial institution – the Mit Ghamr savings project in Egypt opened for business. A co-operative organisation, all depositors could also obtain small loans for practical productive reasons. Additionally, this co-operative also invested in certain projects on a profit sharing basis. In 1971, this project was incorporated with the Nasser Social Bank.
Additionally, well-respected conferences such as the Finance Ministers of the Islamic Countries, the First International Conference on Islamic Economics debated Islamic financing. As a consequence, the application of interest-free banking from simply a theory to actual practice occurred – and in 1975, an intergovernmental bank was created. In that same year, the first privately owned interest free bank – called the Dubai Islamic Bank also opened with more banks opening after that in countries such as Sudan, Egypt, and Kuwait.
Since 1975, over fifty interest-free banks opened with the majority of these financial institutions being in Muslim countries. That said, Islamic banks also opened in Western Europe during the early 1980s. In addition, the governments of both Pakistan and Iran implemented an Islamic banking system in all of the banks.
Islamic Banking Today
Growing at a rate of ten to fifteen percent on an annual basis since the late 1990s, these types of financial institutions continue to flourish as patrons recognise the benefits these banks offer. Further, the number of banks that offer Islamic financial services continues to grow – and even some conventional banks offer Islamic financing options. Thus, Islamic banks do offer an appealing alternative to the more traditional commercial banking system. Sharia structuring and consulting companies, such as ijaraloans.com have grown dramatically over the past decade to become a convenience source of Islamic Finance solutions for Muslim consumers.
Current Issues Islamic Business Transaction in Malaysia
Instances in which it is Permissible to Cancel a Transaction
The two parties, which are the seller and purchaser, have the right to cancel a transaction in eleven situations. It is termed the right of cancellation (Khiyaarul-Faskh). They are:
1) As long as they, the seller and purchaser, have not parted and left the place of the transaction. It is called Khiyaarul-Majlis.
2) When it becomes clear that there was fraud from one of the two sides. It is called Khiyaarul-Ghabn.
3) When they, the seller and purchaser, make the condition that one of them or both of them have the right to cancel the transaction during a specific time period. It is called Khiyaarush-Shart.
4) When one of the two parties cheats and deceives. Then describes his commodity with other than its (proper description). It is called Khiyaarut-Tadlees.
5) When the seller or purchaser makes it conditional that the...
