Islamic Finance – As It Travelled Through 1400 Years Prior Landing in Pakistan amid Scholastic Controversies

By Shafiq ur Rahman

Abstract

There is strong urge among Muslim these days to Islamize economy and particularly banking. The main factor which triggered this desire is the political independence of Muslims from colonial yoke and also windfall of petro-dollars in Arab countries. Emphasis on Islamization of banking appears to be due to the commercial banking system being based on interest whereas interest is strictly banned in Islam. The literature of economics is traceable in each Muslim period but under different names and not under economics. Even the sayings of the Prophet contain guidance in economic matters. These were compiled and codified under Shariah which is Islamic law.

The history of finance is divided into four phases – two registered development, the third one was a period of stagnation and the last brought awakening, which resulted in the establishing of Islamic banking in which interest has been abolished and trade in Haram merchandise is banned. This system has made phenomenal progress and solved the problem of Muslim Ummah to avoid interest which had come to pervade every facet of life. However some schools of Ulema have expressed their reservations about the Islamicity of the Islamic banking whereas others disagreed with them. This controversy will impede the progress of Islamic banking. It would be in the interest of Muslims if this conflict is resolved amicably.