The history of Islamic banking is a long and storied one.
It can be traced back to the time of the Prophet S.A.W. and his companions, specifically Zubair ibn Al-Awwam R.A.
History of Islamic Finance
Amongst the companions, he was considered one of the most trustworthy companions and many of them kept their properties and wealth with him for safekeeping.
During this time, a lot of people gave their property and wealth to him and it accumulated to the point where he wanted to safeguard his reputation as well as to remove doubt from the hearts of the companions.
Instead of taking the properties or the wealth as a form of trust, he took it on as a loan instead, functioning very similarly to Islamic banks of today whereby they accept deposits into their bank accounts.
At the time of his death, it was calculated that the amount of loans he had accumulated in his life had come to about one million dirhams.
If you take into consideration inflation over 1,500 years, that’s a very large amount of money.
The first Islamic financial institution was actually founded in the time of the Khulafa’ Rashiduun, specifically under Umar ibn Al Khattab R.A.
And if you fast forward to the future, the first fully Islamic bank was actually established here in Dubai in 1975, Dubai Islamic Bank.
Current day, the value of Islamic banking industry is worth more than 2 trillion US dollars.
That’s more than 1/3 of the American economy in 2016.
It’s a long way since 1 million dirhams back in the time of the Prophet.