Islamic Finance For Dummies

Chapter 3

The History of Islamic Finance

In This Chapter

Establishing the core concepts of Islamic finance

Developing an alternative to conventional banking

Watching the Islamic banking industry bloom

Islamic finance has been one of the most discussed phenomena in the financial industry in the early 21st century, in part because the global financial crises that rocked investors starting in late 2007 underscored the importance of alternatives to the status quo.

In response to growing demand for alternative investment and banking options among Muslims and non-Muslims alike, many conventional banks, including those in the West, have opened Islamic branches or Islamic windows (which I discuss in Chapter 4). In Muslim countries, full-fledged Islamic financial institutions have emerged to provide viable sharia-compliant financial products ranging from bank accounts and mutual funds to takaful (Islamic insurance) and a form of bonds.

Since the 1970s, when the modern history of the Islamic finance industry began, more than 500 Islamic financial institutions have been established worldwide. (In Chapter 4, I offer details about the current state of the Islamic finance industry as well as ...