Historical Background
The first Islamic banking experience was witnessed in Egypt in 1963 in the small town of Mit-Ghamr under the initiative of the late Dr. Ahmad Al-Najjar. The resulting bank provided financing based on partnership agreements with clients for the formation of joint ventures, and based on the profit and loss sharing principle.
It was not until 1975, that Dubai Islamic Bank was established followed by the Islamic Development Bank which started operations in that same year.
Among other factors, the surge in oil prices along the years and the need to put back profits generated into circulation has been a driving force for the establishment of new Islamic banks in this part of the world. Furthermore, increasing revenues have fueled the proliferation of Islamic banks in the Arab world, Asia and Europe. It has been claimed that Islamic banking, as a sector, has grown at rate of 15%-20% per year, with over 300 Islamic financial institutions worldwide.
Within the financial system, Islamic banks are unique in being non-interest based operationally. They abide by the Islamic rules and regulations (Shari’a) to promote Islamic financial standards and code of ethics from a business transactional point of view. |
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