Islamic Banking
Yadiel L.P
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Islamic Banking was a key innovation for the Muslim people as it provided a good banking system to be used among the Islamic civilization. It is a banking system that differs among other traditional styles as it adheres to Shariah law. Shariah law prohibits bad habits (gambling, smoking, etc.), prohibits corruption and doesn't use interest.
How was Islamic Banking introduced?
How was Islamic Banking introduced?
Islamic Banking was introduced by the Prophet Muhammad in the 7th-8th century.
Prophet Muhammad was said to have been the founder of the Islamic civilization.
The Prophet Muhammad didn't directly introduce the banking system himself but instead established the basis of Islamic Finance by establishing the Shariah law; the law that Islamic banking must comply with.
So how does Islamic Banking work?
Islamic Finance (Banking) complies with the Shariah law. The Shariah law prohibits many things but also encourages certain practices. The Shariah law prohibits bad practices such as gambling and the purchase of tobacco or other addictive products (which is called haram). It is also extremely against corruption. Something that the Shariah law encourages though, is shared risk and partnership among its users. One thing that Islamic Banking is famous for is its interest-free system. So how are banks supposed to make money without interest you may ask? They can make money from Murabarah which is the process in which a bank can obtain an asset for a customer then sell it to them for it's price plus profit for the bank. Another way can be a process called Wakala, which is when an agent from a bank is used to carry out a task for a customer, and then the customer pays the bank for their services. These are only two examples of how the bank can make money without charging interest but there are other ways as well.
What is one contribution that the Islamic civilization had on banking and commerce?
One contribution that the Muslim people had on banking and commerce was the introduction of the Hawala system. The Hawala system was a process in which a customer would give money to a trusted agent and then the same agent would travel to another customer's location to transfer the money. This system would have helped make it easier to transfer money from one point to another. Of course, with modern day money transfers this is much easier and can be done online; but back then this would have been harder and this system would make it easier for citizens of the Islamic civilization to transfer money.
What impact did Islamic banking have on the Islamic civilization and modern times?
What impact did Islamic banking have on the Islamic civilization and modern times?
If being honest, Islamic banking didn't have any impact on the Islamic civilization at first. Although it did have a good amount of users. It didn't gain popularity until recently (the 1900's). Up until recently this banking system has gained massive amount of users, and millions of people use it. It is worth an estimated 3.5 trillion (as of recently, from Article 1) . With one article describing it as "the world's fastest growing banking sector " (current) , which says something about its recent popularity and growth.
Some Islamic finance related images...
Other interesting websites about Islamic Banking:
Other interesting websites about Islamic Banking:
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Islamic Banking - Investopedia - This article describes the following:
What it is.
What it's principles are.
It's history
Different examples of their system
Sanabil Development - What this article might be useful for:
The origins (history) of Islamic banking
It's Colonial Era and Decline
It's Modern Revival
How it has grown and what challenges It has gone through
History of Islamic Banking and Finance - Aims Education - This website could help with topics such as:
The history of Islamic Banking
Developments of Islamic Banking
Evolution of Islamic Banking
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