Editing Islamic banking and finance (section)

===Usury in Islam===
{{further|Riba}}
Although Islamic finance contains many prohibitions—such as on consumption of alcohol, gambling, uncertainty, etc. – the belief that "all forms of interest are ''[[riba]]'' and hence prohibited" is the idea upon which it is based.{{sfn|Khan|2013|pp=xv-xvi}}
The word "''riba''" literally means "excess or addition", and has been translated as "interest", "usury", "excess", "increase" or "addition".<ref>{{Cite web|url=http://www.masrif.net/index.php?option=com_content&view=article&id=68:riba-in-the-contemporary-context-by-az&catid=35:religion|title=RIBA IN THE CONTEMPORARY CONTEXT (by Asif Zaidi)|last=Zaidi|first=Asif|website=masrif.net|language=en-gb|access-date=29 April 2017}}</ref><ref>{{Cite book|url=http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1359&context=commpapers|title=A Primer on Islamic Finance: Definitions, Sources, Principles and Methods|last1=Gait|first1=Alsadek H.|last2=Worthington|first2=Andrew C.|publisher=University of Wollongong. Research Online|year=2007|pages=7}}</ref>

According to Islamic economists Choudhury and Malik, the elimination of interest followed a "gradual process" in early Islam, "culminating" with a "fully fledged Islamic economic system" under Caliph [[Umar]] (634–644 CE).<ref>Choudhury, M.A. and Malike, U.A. (1992) ''The Foundations of Islamic Political Economy'', London: Macmillan; New York: St. Martin's Press. p.&nbsp;104</ref>

Other sources (''Encyclopedia of Islam and the Muslim World'', Timur Kuran), do not agree, and state that the giving and taking of interest continued in Muslim society "at times through the use of legal ruses (''[[ḥiyal]]''), often more or less openly,"<ref name="EoIMW-596">''Encyclopedia of Islam and the Muslim World'', p.&nbsp;596</ref> including during the Ottoman Empire.<ref name="TKLD2011:148">Kuran, ''The Long Divergence'', 2011: p.&nbsp;148</ref><ref name="TKLD2011:152">Kuran, ''The Long Divergence'', 2011: p.&nbsp;152</ref>
Still another source (International Business Publications) states that during the "Islamic Golden Age" the "common view of ''riba'' among classical jurists" of Islamic law and economics was that it was unlawful to apply interest to gold and silver currencies, "but that it is not ''riba'' and is therefore acceptable to apply interest to fiat money – currencies made up of other materials such as paper or base metals – to an extent."<ref name=ILMC-23/>{{#tag:ref|Thus, when "currencies of base metal were first introduced in the Islamic world, no jurist ever thought that paying a debt in a higher number of units of this fiat money was ''riba''" as they were concerned with "the [[real versus nominal value|real value]] of money."<ref name=ILMC-23>{{cite book|last1=IBP, Inc.|title=Investment Laws in Muslim Countries Handbook Volume 1 Investment Laws ..|publisher=Lulu.com. ("updated annually")|page=23 |url=https://books.google.com/books?id=1MKrCQAAQBAJ&q=%22surplus+value+without+counterpart%22+%22to+ensure+equivalency+in+real+value%22&pg=PA23 |access-date=9 August 2015|isbn=9781433023972|date=25 March 2015}}{{self-published source|date=February 2020}}</ref>{{self-published inline|date=February 2020}}|group=Note}}

In the late 19th century [[Islamic Modernist]]s reacted to the rise of [[History of Islam#Modern period|European power and influence]] and its colonization of Muslim countries by reconsidering the prohibition on interest and whether interest rates and insurance were not among the "preconditions for productive investment" in a functioning modern economy.<ref name="Kepel-77">{{cite book|last1=Kepel|first1=Gilles|title=Jihad: on the Trail of Political Islam|date=2003|publisher=Harvard University Press|page=77|url=https://books.google.com/books?id=OLvTNk75hUoC&q=this+loose+approach+prevailed&pg=PA77|access-date=13 May 2015|isbn=9781845112578}}</ref> [[Syed Ahmad Khan]], argued for a differentiation between sinful ''riba'' "usury", which they saw as restricted to charges on lending for consumption, and legitimate non-''riba'' "interest", for lending for commercial investment.{{sfn|Aḥmad|1958}}

However, in the 20th century, Islamic revivalists/Islamists/activists worked to define all interest as ''riba'', to enjoin Muslims to lend and borrow at "Islamic Banks" that avoided fixed rates. By the 21st century this Islamic Banking movement had created "institutions of interest-free financial enterprises across the world".<ref>Choudhury, M.A. and Malike, U.A. (1992) ''The Foundations of Islamic Political Economy'', London: Macmillan; New York: St. Martin's Press., p.&nbsp;104</ref> Loans are permitted in Islam if the interest that is paid is linked to the profit or loss obtained by the investment. The concept of profit acts as a symbol in Islam as equal sharing of profits, losses, and risks.

The movement started with activists and scholars such as Anwar Qureshi,<ref>Qureshi, Anwar Iqbal. ''Islam and the Theory of Interest'', with an Introduction by Syed Sullaiman Nadvi, Lahore, Muhammad Ashraf, xxiw, 223p. Arabic translation ''al-Islam wa'l riba'' by Faruq Hilmi, al-Qahirah Maktabah, Misr, 158p.</ref> [[Naeem Siddiqui]],<ref>Siddiqui, Naeem. "Islami usul par banking" (Banking according to Islamic principles) ''Chiragh-e-Rah'' (Karachi) 1(11), November 1948: 60–64; 1(12), December 1948; 24–28</ref> [[Abul A'la Maududi]], [[Muhammad Hamidullah]], in the late 1940 and early 1950s.<ref name="MNSMET1981">{{cite book|last1=Siddiqi|first1=Muhammad Nejatullah|title=Muslim Economic Thinking|date=1981|publisher=The Islamic Foundation|location=UK|pages=29–30}}</ref> 
They believed commercial banks were a "necessary evil," and proposed a banking system based on the concept of ''[[Profit and loss sharing#Mudarabah|Mudarabah]]'', where shared profit on investment would replace interest.  Further works specifically devoted to the subject of interest-free banking were authored<ref name="coif">{{cite web|title=ISLAMIC BANKING|url=http://www.correctislamicfaith.com/islamicbanking.htm|website=LET US CORRECT OUR ISLAMIC FAITH|access-date=28 July 2016|archive-url=https://web.archive.org/web/20160822214717/http://www.correctislamicfaith.com/islamicbanking.htm|archive-date=22 August 2016|url-status=dead}}</ref><ref name="Alharbi">{{cite journal|last1=Alharbi|first1=Ahmad |title=Development of the Islamic Banking System |journal=Journal of Islamic Banking and Finance |date=2015 |volume=3 |issue=1 |page=14 |doi=10.15640/jibf.v3n1a2|doi-broken-date=1 November 2024 |url=http://jibfnet.com/journals/jibf/Vol_3_No_1_June_2015/2.pdf|access-date=16 May 2017|doi-access=free }}</ref> by Muhammad Uzair (1955), Abdullah al-Araby (1967), [[Mohammad Najatuallah Siddiqui]],<ref>(1961, 1969. The 1969 work is''G̲h̲air sūdī bank kārī''. 1969</ref> al-Najjar (1971) and [[Muhammad Baqir al-Sadr]].<ref>Muhammad Baqir al-Sadr, ''[[Iqtisaduna]]'' 1961; ''Al-Bank al-la Ribawi fi al-Islam'' (Usury-free Banking in Islam) 1974.</ref>

====Since 1970====
The involvement of institutions, governments, and various conferences and studies on Islamic banking (Conference of the Finance Ministers of the Islamic Countries held in Karachi in 1970, the Egyptian study in 1972, The First International Conference on Islamic Economics in Mecca in 1976, and the International Economic Conference in London in 1977) were instrumental in applying the application of theory to practice for the first interest-free banks.<ref>ISLAMIC BANKING By A.L.M. Abdul Gafoor [http://users.bart.nl/~abdul/chap4.html 4.1 Historical development] {{Webarchive|url=https://web.archive.org/web/20170821185300/http://users.bart.nl/~abdul/chap4.html |date=21 August 2017 }}</ref><ref>
Sami Hassan Homoud, established the Jordanian Islamic Bank in 1978. (source: {{cite book|last1=Salihovic|first1=Elnur|title=Major Players in the Muslim Business World|date=2015|publisher=Universal-Publishers.com|page=368|url=https://books.google.com/books?id=aSa1DAAAQBAJ&q=Jordanian+Islamic+Bank+Sami+Hassan+Homoud&pg=PA368|access-date=31 August 2016|isbn=9781627340526}})</ref> At the First International Conference on Islamic Economics, "several hundred Muslim intellectuals, Sharia scholars and economists unequivocally declared ... that all forms of interest" were ''riba''.<ref name=Kepel-77/>{{sfn|Khan|2013|p=143}}

By 2004, the strength of this belief (which is the basis of Islamic finance){{sfn|Khan|2013|pp=xv-xvi}} was demonstrated in Pakistan—when a minority (non-Muslim) member of the Pakistani parliament{{#tag:ref|i.e. M.P. Bhindara, one of the non-Muslim MNA – Member of the [[National Assembly of Pakistan]] – representing their minority religious group – in this case the Hindus – rather than an electoral district.|group=Note}} questioned it, pointing out that a scholar from [[Al-Azhar University]], (one of the oldest Islamic Universities in the world), had issued a decree that bank interest was not un-[[Islamic]]. His statement resulted in "pandemonium" in the parliament, a demand by members of leading [[Islamist]] political party{{#tag:ref|the [[Muttahida Majlis-e-Amal]] (MMA) party|group=Note}} to immediately respond to these allegedly derogatory remarks, followed by a walkout when they were denied it. When the upset members of parliament returned, their leader (Sahibzada Fazal Karim), stated that since the Pakistan [[Council of Islamic ideology]] had decreed that interest in all its forms was ''[[haram]]'' (forbidden) in an Islamic society, no member of parliament had the right to "negate this settled issue".<ref name="dawn.com">[http://www.dawn.com/2004/06/17/top2.htm Govt accused of fudging figures: Poverty reduction]| dawn.com | 17 June 2004</ref>

The council's decree notwithstanding, over the years a minority of Islamic scholars ([[Muhammad Abduh]], [[Rashid Rida]], [[Mahmud Shaltut]], [[Syed Ahmad Khan]], Fazl al-Rahman, [[Muhammad Sayyid Tantawy]] and [[Yusuf al-Qaradawi]]) have questioned whether ''riba'' includes all interest payments.<ref name="RBIRPMNS2004:55-56">Siddiqi, ''Riba, Bank Interest'', 2004: p.&nbsp;55–56</ref> Others (Muhammad Akran Khan) have questioned whether ''riba'' is a crime like murder and theft, forbidden by [[Sharia]] (Islamic law) and subject to punishment by human beings, or simply a sin to be inveighed against, with the reprimand left to God, since "neither the Prophet nor the [[Rashidun|first four caliphs]] nor any subsequent Islamic government ever enacted any law against ''riba''."{{sfn|Khan|2013|pp=55-56}}

With an increase in the Muslim population in Europe and the current lack of supply, opportunities will arise for the important role which Islamic finance plays in Europe's economy. In particular, Luxembourg is emerging as a leader and hub for Islamic funds.<ref>{{Cite web|url=https://www2.deloitte.com/lu/en/pages/islamic-finance/articles/islamic-finance-europe.html|title=Islamic Finance in Europe|website=Deloitte Luxembourg|language=en|access-date=2019-11-09|archive-date=9 November 2019|archive-url=https://web.archive.org/web/20191109000645/https://www2.deloitte.com/lu/en/pages/islamic-finance/articles/islamic-finance-europe.html|url-status=dead}}</ref>