Islamic banking: History and development

The theory of Islamic banking as a new phenomenon started to appear during 1940s through 1960s, in Urdu, Arabic and English. Among the earliest proposal for Islamic banking, one was made by Qureshi (1946) in his book Islam and Theory of Interest. He suggests that both Islamic bank and entrepreneur can create partnership. Later contributions such as Uzair's (1955), Irshad (1964) and Al - Arabi (1966) also suggested that mudarabah should be the main principle for Islamic banking. While the first theoretical works began in 1940s, the experimental works in this regard did not start until 1960s. In 1975 the first private commercial Islamic Bank 'Dubai Islamic Bank' was established by a group of Muslim businessmen from several countries.