Stages of development of Islamic banking, description and world experience

The term "Islamic banks" is well known not only in the Muslim world now; it determines the shape of banking, in which services are provided to clients based on the principles of Sharia. Many Islamic banks were created and operate on an interest free basis in different parts of the world; this way three Islamic countries (Pakistan, Iran and Sudan) made a bold attempt to abolish interest across the entire economy. There has been considerable progress in this area. The first practical steps in this direction were made only in the early 1960s. In particular, the first successful experiment with the formation of a financial institution operating without interest is the project of a savings bank in Mit Hamre, a small Egyptian town, located in the Nile Delta, although at the time the term "Islamic bank" did not exist. The Head of the project, Dr. Ahmad Ali Nagtar, waged a long campaign among residents of the town and the surrounding villages before the opening of the first branch in 1963. The purpose of this project was to attract the rural population in the process of capital formation. The so-called "Islamic revival" that spread in the entire Muslim world was the impetus for the creation of Islamic banking. In the 1970s, in many Muslim countries there were political changes that gave rise to the legalization of Islamic financial institutions. In the Near East many Islamic banks found their legal existence, such as Dubai Islamic Bank (1975), Faizel Islamic Bank in Sudan (1977), Faizel Islamic Bank of Egypt (1977), Bahrain Islamic Bank (1979). The Pacific-Asian region did not remain unaffected by this wind of change. The establishment of the bank was a concession of the Philippine government in response to the uprising of Muslims with the requirements to meet the needs of the economic aspects of the life of the Muslim community. This bank is not considered fully Islamic, because along with Islamic financing methods it practices normal interest operations. It is interesting to watch how the Philippine Bank operates with two "windows" of deposit operations: traditional and Islamic. In Malaysia, Islamic banking debut took place in 1983. The first Islamic financial institution in Malaysia was the Islamic Corporation for Savings Deposits of Pilgrims, founded in 1963. This bank has 14 branches in different parts of the country. It should be noted some Islamic financial institutions were established in countries where Muslims are a minority. The Islamic Finance House, founded in Luxembourg in 1978, showed an example of Islamic banking to the Western community. To date, Islamic banks are open and successfully operate in the USA, UK, Western Europe. In Copenhagen there works the Islamic International Bank of Denmark, in Melbourne the Islamic Investment Company of Australia. Development of financial institutions in the global aspect can be represented as several stages: 1. Formation of Islamic banking; 2. Improvement of existing and emergence of new banking institutions; 3. State support for Islamic banks; 4. Increase of financial instruments; 5. Continuous growth and maturity of the industry, along with risk issues. Despite the three decades of experience, the Islamic banking system is far from perfect, its main problem is still the limited possibility of raising additional capital through the issue and placement of shares.

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