Three decades of modern Islamic banking

The Islamic finance industry has developed a net worth of over $200 billion. Western banks and early Muslim owned banks were interest-based institutions; and while small independent micro-credit institutions were formed in the 1950's and 1960's, it was not until the 1970's that the first true banks appeared. The most significant factors that facilitated the development of Islamic banks include the commitment of Arab governments to the Islamic Development Bank, the increased oil prices and revenues from them beginning in 1973, and the efforts of Islamic scholars. The concept of murabaha (mark-up trade financing) was developed was developed in the 1970's as a low risk alternative to mudaraba. These short term financing methods were complemented in the 1980's by ijara leasing or purchase contracts. Recent developments such as an Islamic money market in Bahrain and other government backed bonds and Sukuk will help to promote markets in Islamic securities.