The topic of Islamic banking is now being hotly debated among the netizens. Islamic banking is seen to be identical to conventional banking, and the name "Islam" is used to obscure the community. However, before we get into the system and the issues that arise in Islamic banking, did you know that Islamic banking does have a long, rich history?
The History of Islamic Banking
The first Islamic bank in the world has already been founded in 1963. The Mit-Ghamr Local Savings Bank was Egypt's first Islamic bank, founded in 1963 by Egyptian economist Dr. Ahmad El Naggar. Mit-Ghamr Local Savings Bank is an apprentice project that tries to incorporate Islamic values into banking processes without projecting an Islamic image for fear of being perceived as an expression of Islamic foundations. The German Savings Bank was utilised as a model for this project, and it was coupled with the concept of a rural commercial bank to develop a framework based on Islamic values.
The Mit-Ghamr Local Savings Bank is profit-sharing-based. It offers three different types of accounts: savings, investment, and zakah accounts. Depositors are not charged or paid interest because interest is prohibited in Islam, but they are free to withdraw on demand. A short-term, interest-free loan for productive purposes is also available to depositors. Apart from that, the investment account is founded on profit-sharing concepts, with the bulk of assets invested in the business directly or through partnerships. The zakah account, on the other hand, accumulated zakah for redistribution to the poor and needy.
The Mit-Ghamr Local Savings Bank has experienced unexpected success, with an increase in deposits for saving and investment accounts. Unfortunately, due to a variety of political factors, the project was suspended. Nevertheless, the success of Mit-Ghamr Local Saving Bank was the first experiment that demonstrated that commercial banking activity could be organised based on Islamic principles while adhering to the prohibition on riba and not engaging in interest.
Malaysian First Islamic Bank
The first Islamic bank in Malaysia was founded in 1983 when Bank Islam Malaysia Berhad (BIMB) became the country's first Islamic bank. The Tabung Haji institution is one of the driving forces behind the formation of Islamic banking institutions in Malaysia. This is due to the Tabung Haji institution mechanism's success in assisting the Malaysian Muslim community in savings for Hajj, Islam's fifth pillar.
The success of the Tabung Haji institution, as well as the community's trust in Islamic finance, has sparked interest in Islamic banking. As a result, BIMB was founded with the goal of providing a Shariah-compliant banking system to the country's Muslim community.
Conclusion
For more than 30 years, Malaysia has had an Islamic banking industry. For any financial activity in the past, we had no choice but to adopt the conventional banking system. Today, Islamic banking, on the other hand, offers shariah-compliant services like takaful protection, Ar-rahnu, Sukuk, and several other financing products to assist us to manage our daily finances.