Development of Financial Instruments in an Islamic Framework

Abstract

Almost three decades have passed since the founding of the first modern Islamic bank in the small Egyptian delta town of Mit Ghamr. Islamic banking has developed so remarkably in the last quarter century, that it is hard to believe that the movement is so young.

The main expansion occurred in the 1970s, with the opening of the Islamic Development Bank in 1975, the first international aid agency to advance funds on an interest free basis. In the field of commercial banking, 1975 also witnessed the opening of the Dubai Islamic Bank, followed in 1977 by the Faisal Islamic Banks of Egypt and Sudan and the Kuwait Finance House. The following year saw the start of business of the Jordan Islamic Bank for Finance and Investment, the first venture of its kind by the Al Baraka group, though most of the shareholders were Jordanian. The Bahrain and Qatar Islamic Banks started slightly later, but were soon to establish themselves as significant forces in domestic retail banking.