The History and Development of Islamic Finance

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INTRODUCTION
Defination of Islamic Finance
Islamic finance means is the provision of financial instrument and services that follow the principle and rules of Islamic commercial jurisprudence, a branch of Islamic shariah jurisprudence. It also can be defined as a complete system that prescribes specific patterns of social and economic behaviour for all individual.The main principle of Islamic finance is its adherence to interest or riba. Below this explain the term that prohibits in Islam:
a) Riba
Riba or usuary is the predetermined interest collected by a lender , which lender receives over and above principal amount it has lent out
b) Gharar
Gharar means uncertainty. It knowingly expose oneself one property jeopardy or the characteristic are not accurate. For instance, advise clients or investors to buy shares in the company by offering a low price without telling disadvantage or effects of buying the shares. c) maysir maysir means speculation about something. This terms is prohibit because it will make policy holder loss 100% from his capital or investing fun. For example in insurance term, maysir happen when policy states that if termination is done before maturity date, the holder will not get any payment of his premium.

History of Islamic finance
In the past, all transaction and trading of business happened just by using the barter system. It means if someone or an individual need something item, he can get it by exchange any item that he had with item that he want,owns by others. For example 5 grams of gold in exchange with 10 grams of silver. However this transaction is lack of standardization and prac...

... middle of paper ...

...er ona deferred payment and then the asset is immedietly repurchased for cash at the discount.
Al-Wakalah
The concept of nominating another person to act. It refers to situation, where a person nominates another person to act on his behalf. For example bank is act behalf of its customer or depositers in making a payment to the other parties.
Bai’ as-salam
Bai’ as-salam is about an agreement whereby payment is made immedietly while the goods are delivered at an agreed later date. It is equivalent to an advance payment. For example transaction of this concept is an online shopping whereas the customer need to bank-in fund first then the seller will delivered the goods.
Al-hiwalah
Transaction of funds from depositor’s account to the receiver’s creditor’s account is the contract of Al-Hiwalah. However depositor has to pay a commision may be charged for such service.

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