Islamic banking refers[M1] to a system of banking or banking
activity that is consistent with the principles of the Shari'ah (Islamic
rulings) and its practical application through the development of Islamic
economics. The principles which emphasise moral and ethical values in all dealings
have wide universal appeal. Shari'ah prohibits [M2] the payment or acceptance of
interest charges (riba) for the lending and accepting of money, as well as
carrying out trade and other activities that provide goods or services
considered contrary to its principles. While these principles were used[M3] as the basis for a flourishing
economy in earlier times, it is only in the late 20th century that a number of
Islamic banks were
formed [M4] to provide an alternative basis to
Muslims although Islamic banking is not restricted [M5] to Muslims.
Islamic
banking has the same purpose as conventional banking except that it operates [M6] in accordance with the rules of
Shari’ah, known as Fiqh al-Muamalat (Islamic rules on transactions).
Islamic banking activities must be practiced consistent with the Shari’ah and
its practical application through the development of Islamic economics. Many of
these principles upon which Islamic banking is based are commonly accepted all
over the world, for centuries rather than decades. These principles are not new [M7] but arguably, their original state
has been altered over the centuries.
The principle source of the Shari’ah is The Qur’an followed by the recorded [M8] sayings and actions of Prophet Muhammad (pbuh) – the Hadith. Where solutions
to problems cannot be found in these two sources, rulings are made based on the
consensus of a community leaned scholars, independent reasoning of an Islamic
scholar and custom, so long as such rulings to not deviate from the fundamental
teachings in The Qur’an.
It is evident that Islamic finance was practiced predominantly in the Muslim
world throughout the Middle Ages, fostering trade and business activities. In
Spain and the Mediterranean and Baltic States, Islamic merchants became
indispensable middlemen for trading activities. It is claimed that many
concepts, techniques, and instruments of Islamic finance were later adopted [M9] by European financiers and
businessmen.
The revival of Islamic banking coincided[M10]
with the world-wide celebration of the advent of the 15th Century of Islamic
calendar (Hijra) in 1976. At the same time financial resources of Muslims
particularly those of the oil producing countries, received a boost due to
rationalisation of the oil prices, which had hitherto been under the control of
foreign oil Corporations. These events led Muslims' to strive to model their
lives in accordance with the ethics and principles of Islam.
Disenchantment with the value neutral capitalist and socialist financial
systems led not only Muslims but also others to look for ethical values in
their financial dealings and in the West some financial organisations have
opted for ethical operations.
Origin
The origin
of the modern Islamic bank can be traced back to the very birth of Islam when
the Prophet himself acted[M11]
as an agent for his wife's trading operations. Islamic partnerships (mudarabah)
dominated the business world for centuries and the concept of interest found
very little application in day-to-day transactions.
Such
partnerships performed an important economic function. They combined[M12]
the three most important factors of production, namely: capital, labour and
entrepreneurship, the latter two functions usually combined in one person. The
capital-owner contributed the money and the partner managed the business. Each
shared in a pre-determined share of the profits. If there was a loss, the
capital-provider lost his money and the manager lost his time and labour.
Difficult words:
1.
Development = perkembangan
2.
Rulings = keputusan hakim
3.
Principle = asas, prinsip
4.
Emphasise = mengutamakan
5.
Appeal = memohon
6.
Provide = menyediakan
7.
Accordance = kesesuaian
8.
Commonly = biasa
9.
Centuries = berabad-abad
10.
Altered = mengubah
11.
Leaned = menyandarkan
12.
Scholars = beasiswa
13.
Deviate = berselisih
14.
Fundamental = pokok
15.
Evident = terang
16.
Predominantly = sebagian besar
17.
Throughout = seluruhnya
18.
Fostering = mengembangkan
19.
Indispensable = sangat diperlukan
20.
Middlemen = pedagang
21.
Revival= kebangkitan kembali
22.
Coincided = kesamaan waktu
23.
Strive = berusaha
24.
Disenchantment = kekecewaan
25.
Opted = memilih
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