Islamic Banking Modes of Finance: Proposals for Further Evolution

Abdel-Rahman Yousri Ahmad

in Islamic Perspectives on Wealth Creation

Published by Edinburgh University Press

Published in print May 2005 | ISBN: 9780748621002
Published online March 2012 | e-ISBN: 9780748653096 | DOI:
Islamic Banking Modes of Finance: Proposals for Further Evolution

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Due to the prohibition of interest in Islam, Islamic banking cannot depend on lending activities. When the Islamic banking models were first proposed in the 1950s and later commenced operation, the pioneers of Islamic banking focused their efforts on turning traditional Islamic contracts of trade and partnership into practicable methods for finance. This is termed as the first phase of the evolutionary process of Islamic banking. During the last thirty years, several Sharīah-compatible financing methods have been developed. However, such modes of finance based on and consistent with classical Islamic contracts are not always sufficient and adequate in fulfilling the needs of modern banking. Like any other financial system, Islamic banking has to be seen as evolving to meet modern requirements. This chapter discusses the Islamic banking modes of finance, and attempts to identify the need for a second phase of evolution in Islamic banking concepts.

Keywords: interest; Islamic banking; Sharīah-compatible financing; modes of finance

Chapter.  9926 words. 

Subjects: Society and Culture

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