Editing Islamic banking and finance (section)

===Banking===
[[File:Housing Bank and Islamic Bank Amman.jpg|thumb|right|upright|A Jordan Islamic Bank branch in [[Amman]]]]
While [[Islamic revival#Since 1970|revivalist]]s like Mohammed Naveed insist Islamic Banking is "as old as the religion itself with its principles primarily derived from the Quran", secular historians and Islamic modernists see it as a modern phenomenon or "[[invented tradition]]".<ref name="islamic-finance-history">{{cite news| url=http://www.islamicfinance.com/2015/02/an-overview-of-the-history-of-islamic-finance/ | work=Islamic Finance | title=A History of Islamic Finance | date=8 February 2015 | first=Naveed | last=Mohammed}}</ref><ref>see also {{cite web|title=The Islamic Banker |url=http://www.theislamicbanker.com/history_islamic_banking/|access-date=12 February 2015|archive-url=https://web.archive.org/web/20150213022607/http://www.theislamicbanker.com/history_islamic_banking/ |archive-date=13 February 2015|url-status=dead}}</ref>

==== Early example: [[Zubayr ibn al-Awwam]] ====
It is argued that the fundraising business of [[Zubayr ibn al-Awwam]] was practically [[Bank]]ing with zero interests.{{sfn|Alharbi|2015|p=1}} Zubayr pioneered this practice by technically modifying the money-keeping service to be a loan which Zubayr was obligated to pay off, while he also got privilege to manage the money he kept to do his business.<ref name="The Growth of Islamic Finance and Banking Innovation, Governance and Risk Mitigation">{{cite book |last1=Mohi-ud-Din Qadri |first1=Hussain |last2=Ishaq Bhatti |first2=M. |title=The Growth of Islamic Finance and Banking Innovation, Governance and Risk Mitigation |date=2019 |publisher=Taylor & Francis |isbn=9780429557507 |url=https://books.google.com/books?id=isyqDwAAQBAJ&q=africa+zubayr+al+awam |access-date=23 December 2021 |format=Ebook}}</ref> The practice of Zubayr to accept deposits from peoples while not charging any interest meant Zubayr died with  an inflated debt of 2,000,000 Dinar{{#tag:ref|1 Dinar during Muhammad era were approximately 12 [[Dirham]]s.{{sfn|Alharbi|2015|p=1}} |group=Note}}{{sfn|Alharbi|2015|p=1}}{{#tag:ref|According to Ibn Sa'd, debt of al-Zubayr 1,200,000 Dinar.{{sfn|Ibn Sa'd|2013|p=81}}|group=Note}} However, al-Zubayr invested the deposit moneys of the clients for his own lucrative businesses, so his inheritors managed to settle his debts, while still leaving many heritage for his family.{{sfn|Ibn Sa'd|2013|p=81}} After his death, his son Abdullah ibn Zubayr sold the property for 1.600.000 [[dinar]].{{sfn|Tarmizi|2017|p=95}} This practice was allowed according to classical scholar consensus, such as Ibn Taymiyyah in his [[Majmu Fatawa]].{{sfn|al Bushi|2019|p=685, 686}}

====Early banking====
According to Timur Kuran, by "the tenth century, Islamic law supported credit and investment instruments" that were "as advanced" as anything in the non-Islamic world, but prior to the 19th century there were no "durable" financial institutions "recognizable as banks" in the Muslim world. The first Muslim majority-owned banks did not emerge until the 1920s.<ref name="Kuran_2004_x-xi">Kuran, Timur. 2004. ''Islam and Mammon: The economic predicaments of Islamism''. Princeton, NJ; Princeton University Press, pp.&nbsp;x–xi</ref>
 
An early [[market economy]] and an early form of [[mercantilism]], sometimes called ''Islamic capitalism'', was developed between the eighth and twelfth centuries.<ref>Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), p. 79–96 [81, 83, 85, 90, 93, 96].</ref> The [[monetary economy]] of the period was based on the widely circulated [[currency]] the [[gold dinar]], and it tied together regions that were previously economically independent.

A number of economic concepts and techniques were applied in early Islamic banking, including [[bills of exchange]], [[partnership]] (''mufawada'', including [[limited partnership]]s, or ''mudaraba''), and forms of [[Capital (economics)|capital]] (''al-mal''), [[capital accumulation]] (''nama al-mal''),<ref name=Banaji/> [[cheque]]s, [[promissory note]]s,<ref>Robert Sabatino Lopez, Irving Woodworth Raymond, Olivia Remie Constable (2001), ''Medieval Trade in the Mediterranean World: Illustrative Documents'', [[Columbia University Press]], {{ISBN|0-231-12357-4}}.</ref> [[trusts]] (see ''[[Waqf]]''),<ref>Timur Kuran (2005), "The Absence of the Corporation in Islamic Law: Origins and Persistence", ''American Journal of Comparative Law'' '''53''', pp. 785–834 [798–9].</ref> [[transactional account]]s, [[loan]]ing, [[ledger]]s and [[Assignment (law)|assignments]].<ref name="Labib-69-92">Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), pp. 79–96 [92–3].</ref> Muslim traders are known to have used the cheque or ''ṣakk'' system since the time of [[Harun al-Rashid]] (9th century) of the [[Abbasid Caliphate]].<ref name="glubb">{{citation
  | title = A Short History of the Arab Peoples
  | first = John Bagot
  | last = Glubb
  | publisher=Dorset Press
  | year = 1988
  | page = 105
  | isbn = 978-0-88029-226-9
  | oclc = 603697876}}</ref><ref name=Labib-69-92/> [[Organization]]al [[Business|enterprises]] independent from the [[Sovereign state|state]] also existed in the medieval Islamic world, while the [[Agency (law)|agency]] institution was also introduced during that time.<ref>Said Amir Arjomand (1999), "The Law, Agency, and Policy in Medieval Islamic Society: Development of the Institutions of Learning from the Tenth to the Fifteenth Century", ''Comparative Studies in Society and History'' '''41''', pp. 263–93. [[Cambridge University Press]].</ref><ref>Samir Amin (1978), "The Arab Nation: Some Conclusions and Problems", ''MERIP Reports'' '''68''', pp. 3–14 [8, 13].</ref> Many of these early capitalist concepts were adopted and further advanced in [[medieval Europe]] from the 13th century onwards.<ref name="Banaji">Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''[[Historical Materialism (journal)|Historical Materialism]]'' '''15''' (1), pp. 47–74, [[Brill Publishers]].</ref>

====20th century====
{{further| Islamic economic jurisprudence}}

In the middle of the 20th century, some organizational entities were found to offer financial services complying with Islamic laws. The first, experimental, local Islamic bank was established in the late 1950s in a rural area of Pakistan which charged no interest on its lending.<ref>Wilson, R. (1983), Banking and Finance in the Arab Middle East, St Martin's Press, New York.</ref><ref>Cengiz Erol, Radi El‐Bdour, (1989) "Attitudes, Behaviour, and Patronage Factors of Bank Customers towards Islamic Banks", International Journal of Bank Marketing, Vol. 7 Iss: 6, pp.&nbsp;31–37</ref>

In 1963, the first modern Islamic bank on record was established in rural [[Egypt]] by economist [[Ahmad Elnaggar]]<ref name="IFDCS">{{cite web |last1=Jamaldeen|first1=Faleel |title=Key Sharia Principles and Prohibitions in Islamic Finance |url=http://www.dummies.com/how-to/content/islamic-finance-for-dummies-cheat-sheet.html |access-date=24 July 2016}}</ref> to appeal to people who lacked confidence in state-run banks. The profit-sharing experiment, in the [[Nile Delta]] town of [[Mit Ghamr]], did not specifically advertise its Islamic nature for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the [[History of Egypt under Gamal Abdel Nasser|Gamal Nasser regime]]. Also in that year the Pilgrims Saving Corporation was founded in Malaysia (although not a bank, it incorporated basic Islamic banking concepts).<ref name=IFDCS/>

The Mit Ghamr experiment was shut down by the Egyptian government in 1968. Nonetheless, it was considered a success by many,<ref>{{cite book
|last=Kepel
|first=Gilles
|title=Jihad: The Trail of Political Islam
|year=2006
|publisher=I.B. Tauris
|pages=77
|url=https://books.google.com/books?id=OLvTNk75hUoC&pg=PA61
|isbn=9781845112578
}}
</ref> as by that time there were nine similar banks in the country.<ref name="nine banks">{{cite journal|last1=Ariff |first1=Mohamed |title=Islamic Banking |journal=Asian-Pacific Economic Literature |volume=2 |issue=2 |date=September 1988 |pages=48–64 |doi=10.1111/j.1467-8411.1988.tb00200.x |doi-access=free }}</ref> In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank, which as of 2016 was still in business in Egypt.<ref>{{Cite web|url=http://nsbbank.weebly.com/|title=بنك كل المصريين|website=بنك ناصر الاجتماعي ( NSB )|access-date=13 April 2017}}</ref>

====Since 1970====
{| class="wikitable center floatright" style="text-align: center; max-width: 12em;"
|+ id="publications-table-caption" style="line-height:130%"| Publications available relating to Islamic Finance
|-
! scope="col" | Year
! scope="col" | Number 
|-
|prior to 1979||238
|-
|1999||2722
|-
|2006||6484
|-
|style="font-size:88%;line-height:130%" colspan=2 |
Source: Islamic Finance Project Databank{{sfn|Khan|2013|p=5}}
|}
The influx of "petro-dollars" and a "general re-Islamisation" following the [[Yom Kippur War]] and [[1973 oil crisis]] encouraged the development of the Islamic banking sector,<ref name="Kepel-banking">{{cite book
|last=Kepel
|first=Gilles
|title=Jihad: The Trail of Political Islam
|year=2006
|publisher=I.B. Tauris
|pages=76–77
|url=https://books.google.com/books?id=OLvTNk75hUoC&pg=PA61
|quote=This loose approach prevailed throughout the Muslim world until the 1970s, at which time the total ban on lending with interest was reactivated, in tandem with a general re-Islamisation in the cultural and political domains. ...until 1973, when the tidal wave of petro-dollars changed the entire [economic] waterfront.
|isbn=9781845112578
}}</ref> and since 1975 it has spread globally.{{sfn|Khan|2013|p=289}}

In 1975, the [[Islamic Development Bank]] was set up with the mission to provide funding to projects in the member countries.<ref name="IFGE2010:?">[[#|Warde, ''Islamic finance in the global economy'', 2000]]: p.?</ref> The first modern commercial Islamic bank, [[Dubai Islamic Bank]], was established in 1979.{{sfn|Khan|2013|p=292}} The first Islamic insurance (or ''[[takaful]]'') company – the Islamic Insurance Company of Sudan – was established in 1979.<ref name=IFDCS/> The Amana Income Fund,<ref>{{Cite web|url=https://www.saturna.com/amana|title=Amana Mutual Funds Trust|date=2015-10-21|website=Saturna Capital|access-date=12 April 2017}}</ref> the world's first Islamic mutual fund (which invests only in Sharia-compliant equities), was created in 1986 in Indiana.<ref name=IFDCS/>
 
From 1980 to 1985, Islamic investments underwent a "spectacular expansion" throughout the Muslim world, attracting deposits with the promise of "great gains" and "religious guarantees" supplied by Islamic jurists who were "recruited to issue fatwas denouncing conventional banks and recommending their Islamic rivals."<ref name="GKJTPI2002:280">[[#GKJTPI2002|Kepel, ''Jihad'', (2002)]]: p.&nbsp;280</ref> This growth was temporarily reversed in 1988 in the largest Arab Muslim country, Egypt, when the Egyptian state – worried that Islamist movements were building up a "war chest" and being given financial independence – reversed its tacit support for the industry, and launched a media campaign against Islamic banks.<ref name=GKJTPI2002:280/> The ensuing financial panic led to the bankruptcy of some companies.<ref name="GKJTPI2002:280-1">[[#GKJTPI2002|Kepel, ''Jihad'', (2002)]]: p.280–1</ref>

In 1990 an accounting organization for Islamic financial institutions ([[Accounting and Auditing Organization for Islamic Financial Institutions]], AAOIFI), was established in Algiers by a group of Islamic financial institutions.<ref>Khan, ''What's Wrong with Islamic Banking?'', 2013, 6</ref>{{sfn|Khan|2013|p=6}} Also in that year the Islamic bond market emerged when the first tradable ''[[sukuk]]'' – the Islamic alternative to conventional bonds – were issued by Shell MDS in Malaysia.<ref name=IFDCS/> In 2002, the Malaysia-based Islamic Financial Services Board (IFSB) was established as an international standard-setting body for Islamic financial institutions.<ref name=IFDCS/>

By 1995, 144 Islamic financial institutions had been established worldwide, including 33 government-run banks, 40 private banks, and 71 investment companies.<ref name="Kepel-79">
{{cite book|last=Kepel|first=Gilles|title=Jihad: The Trail of Political Islam|year=2006|publisher=I.B. Tauris|pages=79
|url=https://books.google.com/books?id=OLvTNk75hUoC&pg=PA61|isbn=9781845112578}}</ref> The large US-based [[Citibank]] began to offer Islamic banking services in 1996 when it established the Citi Islamic Investment Bank in Bahrain.<ref name=IFDCS/> The first successful benchmark for the performance of Islamic investment funds was established in 1999, with the [[Dow Jones Islamic Market Index]] (DJIMI).<ref name=IFDCS/>

[[File:Kuala Lumpur Malaysia Wisma-Tun-Sambanthan-01.jpg|thumb|right|Building housing the Islamic Banking & Finance Institute Malaysia (IBFIM) in downtown [[Kuala Lumpur]]]]
Also in the 1990s, a false start was made in Islamic banking in the UK, where bankers declared returns "interest" for tax purposes, while insisting to depositors they were actually "profit" and so not ''riba''. Islamic scholars issued a fatwa stating they had "no objection to the use of the term 'interest'" in loan contracts for purposes of tax avoidance provided the transaction did not actually involve ''riba'', and the Islamic bankers used the term for fear that lack of tax deductions available for interest (but not profit) would put them at a competitive disadvantage to conventional banks.<ref>"Translation of Selected Fatwas of Al-Baraka Seminars" – Seminar 6b pp.&nbsp;81–2, Algeria, 2–6 October 1990</ref> Muslim customers were not persuaded, and a "bad taste" was left "in the mouth" of the market for Islamic financial products.<ref name="Irfan-2015-228">{{cite book|last1=Irfan |first1=Harris |title=Heaven's Bankers |date=2015|publisher=Overlook Press|page=228}}</ref> The [[Al Rayan Bank|Islamic Bank of Britain]], the first Islamic commercial bank established outside the Muslim world, was not established until 2004.<ref name=IFDCS/>

By 2008 Islamic banking was growing at a rate of 10–15% per year and continued growth was forecast.<ref>[http://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf Islamic Banks and Financial Stability: An Empirical Analysis] pg. 5</ref> There were over 300 Islamic financial institutions spread over 51 countries, as well as an additional 250 mutual funds complying with Islamic principles. Worldwide, approximately 0.5% of financial assets<ref name="wsj-2007">{{cite news| url=https://www.wsj.com/articles/SB116839213664272112 | work=The Wall Street Journal | title=World's Assets Hit Record Value Of $140 Trillion | date=10 January 2007 | first=Joanna | last=Slater}}</ref> were estimated to be under Sharia-compliant management according to ''[[The Economist]]'' magazine.<ref name="economist-2009"/>

But as the industry grew it also drew criticism (from M.T. Usmani among others) for not progressing from "debt-based contracts", such as ''murabaha'', to the more "genuine" [[profit and loss sharing]] mode, but instead moving in the opposite direction, "competing to present themselves with all of the same characteristics of the conventional, interest-based marketplace".<ref>{{cite book |url=http://www.kantakji.com/media/7747/f148.pdf| last1=Usmani |first1=Muhammad Taqi |date=2008 |title=Sukuk and their contemporary application |page=13 |access-date=21 September 2016|archive-url=https://web.archive.org/web/20151123025633/http://www.kantakji.com/media/7747/f148.pdf|archive-date=2015-11-23}}</ref>

During the [[2008 financial crisis]], Islamic banks were not initially impacted by the 'toxic assets' built up on the balance sheets of US banks as these were not Sharia-compliant and not owned by Islamic banks. In 2009, the official newspaper of the [[Holy See|Vatican]] (''L'Osservatore Romano'') put forward the idea that "the ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service".<ref>{{cite news |  title = Vatican offers Islamic finance system to Western Banks  | website= world bulletin | date = 6 March 2009 | url = http://www.worldbulletin.net/index.php?aType=haber&ArticleID=37814 | archive-url = https://web.archive.org/web/20200809004308/https://www.worldbulletin.net/index.php?aType=haber&ArticleID=37814 | url-status = usurped | archive-date = 9 August 2020 | access-date=6 August 2016}}</ref> (The Catholic Church forbids usury but began to relax its ban on all interest in the 16th century.)<ref name="Seabourne">{{cite news|last1=Seabourne|first1=Gwen|title=When and why did the Christian Church stop viewing usury as a sin?|url=https://www.theguardian.com/notesandqueries/query/0,5753,-1030,00.html|access-date=28 July 2015|agency=The Guardian}}</ref><ref>Abdul-Rahman, Yahia. 2010: ''The art of Islamic Banking and Finance'', Hoboken, NJ, John Wiley and Sons, 26</ref> 
However, the drop in valuation of real estate and private equity – two segments heavily invested by Islamic firms – following the collapse of Lehman Brothers Islamic did hurt Islamic financial institutions.<ref name="islamic-conventional-comparison">{{cite news | url=https://www.islamicfinance.com/islamic-finance/ | work=IslamicFinance.com | title=Islamic and Conventional Banking Comparison | date=3 July 2015 | first=Naveed | last=Mohammed | access-date=2 July 2015 | archive-date=3 July 2015 | archive-url=https://web.archive.org/web/20150703194338/https://www.islamicfinance.com/islamic-finance/ | url-status=dead }}</ref>

As of 2015, $2.004 trillion in assets were being managed in a Sharia-compliant manner according to the State of the Global Islamic Economy Report.  Of these $342 billion were ''[[sukuk]]''. The market for Islamic ''Sukuk'' bonds in that year was made up of 2,354 sukuk issues,<ref name="reutersSGIER2015-16">{{cite book|url=http://www.startupbusiness.it/wp-content/uploads/2016/10/SALAAM03102016111130.pdf|title=State of the Global Islamic Economy Report 2015/16|publisher=Thomson Reuters & Dinar Standard|pages=54–55|access-date=19 March 2017|archive-date=14 March 2023|archive-url=https://web.archive.org/web/20230314155047/https://www.startupbusiness.it/wp-content/uploads/2016/10/SALAAM03102016111130.pdf|url-status=dead}}</ref> and had become strong enough that several non-Muslim majority states – UK, Hong Kong,<ref name="Economist-8-10-2014">{{cite news|url=https://www.economist.com/blogs/economist-explains/2014/10/economist-explains-0|title=Why Islamic financial products are catching on outside the Muslim world|date=8 October 2014|agency=The Economist|last1=F|first1=J|access-date=6 August 2016}}</ref> and Luxemburg<ref name="luxem">{{cite news|url=http://www.luxembourgforfinance.com/luxembourg-successfully-issues-landmark-sukuk-transaction|title=Luxembourg successfully issues landmark Sukuk transaction|date=10 January 2014|agency=luxembourgforfinance.com|access-date=5 May 2015|archive-date=12 October 2014|archive-url=https://web.archive.org/web/20141012203622/http://www.luxembourgforfinance.com/luxembourg-successfully-issues-landmark-sukuk-transaction|url-status=dead}}</ref> – issued ''sukuk.''

There are multiple Shari'ah-compliant indexes, created by Shari'ah screening of companies. Such indexes include DJIM, S&PSI, MSCI and country-based indexes like KMI-Pakistan and SCM-Malaysia.<ref>{{Cite journal |last=Hanif |first=Muhammad |date=January 2019 |title=Sharīʿah Screening Process of Capital Markets: An Evaluation of Methodologies |url=https://iei.kau.edu.sa/Files/121/Files/153868_32-01-02-MohammadHanif.pdf |journal=Journal of King Abdulaziz University: Islamic Economics |volume=32 |issue=1 |pages=23–42 |doi=10.4197/Islec.32-1.2}}</ref>