UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

The Advent of Islamic Banking

Islam is not only a religion but a complete code of conduct of life covering legal and economic affairs for Muslims.  Islam developed the concept of Bait-al-Mal (Treasury of the Muslim State), which correlates to the modern central banking system long before the modern Western banking system came into existence.

What distinguishes Islamic economics from Western conventional finance is the absence of interest-based transactions as the taking or giving of interest (Riba) violates the Sharia’h Law.  Therefore, financing in Islam is only allowed on an interest free basis.  (Q’uran: Surah Al-Baqarah (2)275/280; Surah An-Nisa (4)/160-16; Surah Al Rum (30/130).  In contrast, the modern Western banking system rests on the principle of the giving and taking of interest.

The first Islamic Banking experiment emerged in Mit Ghamr, Egypt in 1963.  Consequent to this experiment, proposals were submitted to the Second Islamic Conference of Foreign Ministers in 1971 for establishing an Islamic Bank and an Association of Islamic Banks.  This led to the adoption of the Charter of the Islamic Development Bank in 1974 and since then many Islamic Banks have come into existence including the Dubai Islamic Bank in 1975 and the Kuwaiti Finance House in 1977.

*Information taken from the Law and Practice of Islamic Banking and Finance by Dr. Nik Norzrul Thani; Mohamed Ridza Mohamed Abdullah; and Megat Hizaini Hassan.  (2003)

Interesting Report Related to the Advent of Islamic Banking

http://islamicbanking.info/tag/islamic-development-bank/

Islamic Development Bank

http://en.wikipedia.org/wiki/Islamic_Development_Bank

http://www.isdb.org/irj/portal/anonymous?guest_user=idb_en

IDB in Brief

http://www.isdb.org/irj/go/km/docs/documents/

IDBDevelopments/Internet/English/IDB/CM/Publications/

IDBGroupBrief2010.pdf

IDB Articles of Agreement

http://www.isdb.org/irj/portal/anonymous?NavigationTarget=navurl://645975368b808da7346b4c9051f46461

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

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