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Principle islamic banking
Islamic vs commercial banks
Principle islamic banking
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The first modern experiment with Islamic banking was undertaken in Egypt under cover, without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism which was anathema to the political regime. The pioneering effort, led by Ahmad El Najjar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 198l), by which time there were nine such banks in the country. These banks, which neither charged nor paid interest, invested mostly by engaging in trade and industry, directly or in partnership with others, and shared the profits with their depositors (Siddiqi 1988). Thus, they functioned essentially as saving investment institutions rather than as commercial banks. The Nasir Social Bank, established in Egypt in 197l, was declared an interest-free commercial bank, although its charter made no reference to Islam or Shariah (Islamic law).
The IDB was established in 1974 by the Organization of Islamic Countries (OIC), but it was primarily an intergovernmental bank aimed at providing funds for development projects in member countries. The IDB provides fee based financial services and profit-sharing financial assistance to member countries. The IDB operations are free of interest and are explicitly based on Shariah principles.
In the seventies, changes took place in the political climate of many Muslim countries so that there was no longer any strong need to establish Islamic financial institutions under cover. A number of Islamic banks, both in letter and spirit, came into existence in the Middle East, e.g., the Dubai Islamic Bank (1975), the Faisal Islamic Bank of Sudan (1977), the Faisal Islamic Bank of Egypt (1977), and the Bahrain Islamic Bank (1979), to mention a few.
The Asia-Pacific region was not oblivious to the winds of change. The Philippine Amanah Bank (PAB) was established in 1973 by Presidential Decree as a specialized banking institution without reference to its Islamic character in the bank's charter. The establishment of the PAB was a response by the
Philippines Government to the Muslim rebellion in the south, designed to serve the special banking needs of the Muslim community. However, the primary task of the PAB was to assist rehabilitation and reconstruction in Mindanao, Sulu and Palawan in the south (Mastura 1988). The PAB has eight branches located in the major cities of the southern Muslim provinces, including one in Makati (Metro Manila), in addition to the head office located at Zamboanga City in Mindanao.
After the fall of the Roman Empire, no one imagined that the next great world power would emerge from Saudi Arabia. Especially, because ancient empires thought that the land was worthless but they didn’t know that it had great trade routes. Trade brought them in connection with other civilizations and that’s how the city of Mecca, located in Saudi Arabia became known. The city of Mecca was a mix of religious beliefs, they used to worship many gods and had their own rituals. The world of Islam took place in Mecca where Muhammad was born in 570 CE. He became known as “the Prophet,” he was meant to be God’s final prophet. The main two groups of Islam are the Shia and Sunni; which they were created after Muhammad’s death. The Islam religion as
The conception of the Islamic civilization drew much attention in Arabia. In 600 C.E., the rise of this new empire helped its people improve in all studies of sciences and culture. The ability to spread teachings and customs throughout an entire area could not be easily obtained, therefore they used extended force and violence to take control of lands. In 610 C.E, when Muhammed was met by the angel Gabriel and accustomed his beliefs to those of God, the devotion of Muhammed's followers increased at a rapid rate. Following the death of Muhammed in 632 C.E., the civilization expanded very rapidly through momentous success both by converting nonbelievers to Islam and military conquests of opponents. It is noted that during the expansion of the
In 1975, the Islamic Development Bank opened in Saudi Arabia and gave the islamic finance industry an international presence. It recruited member countries and offer them financial products to promote economic and comunity development.
At that time National Savings and Investment Bank was the only bank which was incorporated by a Parliament Act. There was no regulatory framework which led private sector savings banks to carry out its activities. The main problem that PSDB had to face was that the bank did not have “parate execution” rights which allows to sell mortgage property when loans are defaulted by customers. This “parate execution” gives the rights to recover the loan which defaulted by the customers by passing a board meeting resolution and placing paper advertisement informing about the decision. Since Pauma bank did not have that right, it had to consult civil law to recover loans but it was not practical for the bank.
Over the years, the Philippines has gone from being one of the richest countries in Asia to being one of the poorest. It has experienced growth and development since World War II. The current administration under President Gloria Macapagal-Arroyo is aiming for a more rapid growth in the coming years. In 2004, the Philippine economy grew by 6.1% surprising everyone. In 2005, the Philippine peso appreciated by 6%, the fastest in the Asian region for that year. At present, the administration is meeting its expected target growth and is continually looking positive for the future.
As the world has recently passed through the global financial crisis that begun in 2008 in the USA with the banks’ collapsing, analysts are giving different opinions and making new economic hypothesizes about the origin of, as well as the process of different countries escaped from the crisis. Among all these new “theories”, the case of Islamic banks is interesting in terms of its nature and consequences. In my essay, I will try to highlight the basic principles of the Islamic finance, the reasons of the restriction of interest, the most important tools used by Islamic banks in economic activities and brief explanation of them, and finally my view point of the probable future improvement of the Islamic financial system.
The UB model allowed banks to diversify into non-bank financial businesses. The UB model was introduced in 2001 as part of a comprehensive reform and consolidation programme by the Central Bank of Nigeria (CBN) under the leadership of the erstwhile Governor of CBN, Professor Charles Soludo. As a result, Nigerian banks were consolidated through mergers and acquisitions, with the minimum capital base raised from N2 billion to a minimum of N25 billion. This policy reduced the number of Nigerian banks from 89 to 25 in 2005, and later to 24 (Sanusi, 2012; CBN Economic Report, 2013). One of banks that obtained the universal banking licence is FCMB – First City Monument Bank
International Accounting Standard Board (IASB) played an important role in development standards for financial instruments for many years.
The other kind of International Organization (IO) is the NGO which are primarily non-profit private organizations that engage in a variety of international activities (Pease, 2012 p. 4). They are able to particip...
Lastly the challenges faced by the Islamic banking is the lack of unity in giving Shariah’s view. Therefor, it gives problem to the agencies as there are different methodologies that are being proposed when elaborating the law. In order to counter this challenges, agencies need to take initiatives of choosing the view which is parallel or nearly parallel with what was underlined by the Al-Quran and As- Sunnah.
Philippines: Country Profile 2004 1 Dec. 2004 The Economist Intelligence Unit Limited 2004 15 Dec. 2004 www.eiu.com
Philippine politics is the birthplace of promises of great guarantees and additionally the reason for huge dissatisfactions gainful of poverty, poor justice system and low quality of education, agriculture and economic rate.
As there are many types of banking and financial institutions in Cambodia, the scope and limitation of the study is mainly take only the commercial banks and microfinances to examine. The study will only go through the basic background of the banking industry and the basic issues and solutions which excludes the other related cases involved in politics.
Up until the mid 1500s, the islands of the Philippines maintained autonomy. Before the conquering of the Philippines by the Spanish, the Philippines had its own form of rule. During the pre-colonial Philippines, barangays were located throughout the country (Rodell 17). These were essentially small groupings of settlements all throughout the Philippines. Each barangay was headed by a leader referred to as a datu. The barangays often remained constrained to itself, although they made allies with other barangays and this decision was often based off of the relations of the parents of the previous barangay leaders (Rodell 28). Thi...
The Philippine islands are located in Southeastern Asia, between the Philippine Sea and the South China Sea, east of Vietnam. The country is made up of about 7000 islands, only 2000 of those islands are inhabited. The population of the country includes about 84,619,974 people. The people of this country are all very close to their families. They work together to make the income that their family needs to survive. Sometimes th...