Islamic banking is a system of banking that is consistent with the principles of Islamic law that is Sharia and its realistic application is through the growth of Islamic economics. Sharia which prohibits the payment of fees for the renting of money for specific terms like Riba, usury, and also investing in businesses which gives goods or services considered different to its principles that is Haraam, forbidden. Though these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.
The World Islamic Banking Conference held annually in Bahrain since 1994 is the sole platform internationally recognized as the largest and most important assembly of Islamic banking and finance leaders in the world.
Islamic banking offers an integrated and comprehensive approach for banks to define and present Shariah-compliant products to customers. Tough product definition features, support for Islamic accounting and complete traceability for audit differentiate the solution. Completely self-contained, it is replete with the accounting backbone to support back office functionalities and provides Straight through processing capabilities on a SOA platform.
A single clarification built on the standard technology infrastructure available for conventional banking; Islamic banking solution addresses both Islamic banking and international needs. Developed with incisive insight into the Middle East, Far East and European markets, the answer is truly geared to address region-specific Islamic banking necessities.
In the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate. Between the 8th-12th centuries an early market economy and an early form of mercantilism were developed, some refer to as Islamic capitalism. A strong monetary economy was created on the basis of the expanding levels of circulation of a stable high-value currency and the integration of financial areas that were previously independent.
In early Islamic banking a number of innovative concepts and techniques were introduced, for example bills of exchange, the first forms of partnership like limited partnerships, and the earliest forms of capital , capital accumulation , cheques, promissory notes, trusts, startup companies, transactional accounts, loaning, ledgers and assignments. Organizational enterprises related to corporation’s independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced. A lot of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.
The primary modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime. The revolutionary effort, led by Ahmad Elnaggars, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This trial lasted until 1967 (Ready 1981), by which time there were nine such banks in the country.
In 1972, the Mit Ghamr Savings project became element of Nasr Social Bank which, till date, is still in business in Egypt. In 1975, the Islamic Development Bank was started with the undertaking to provide funding to projects in the member countries. The first modern commercial Islamic bank opened its doors in 1975 that is Dubai Islamic Bank. In the beginning, the products offered were basic and strongly founded on conventional banking products, but in the few years back the industry is starting to see strong development in new products and services.
Islamic Banking is rising at a rate of 10 to 15 percent a year and with signs of consistent future growth. Islamic banks have more than 300 institutions spread over 51 countries, and also an extra 250 mutual fund that complies with the Islamic principles.
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