Umm Al-Qura University

Umm Al-Qura University

Message of the Head of the Department

- 2022/08/13

What we witness today of the increasing demand on the Islamic system locally and internationally is only a revival and renewal of a side of the Islamic economic system, which is an integral part of the Islamic belief. Therefore, as believed by some and especially in the western countries - the Islamic banking system is not a modern phenomenon, but is a life system that has roots in the Islamic history. The beginning of this system goes back to the beginning of the Islamic legislation and the rise of the Islamic nation since the seventh century, but the state of weakness that faced the Islamic nation and going under colonization resulted in lower interest in applying the Islamic economic system generally and the Islamic banking system especially.

That was accompanied by the spread of the western economic systems in most of the Islamic countries, led by the usury banking system that caused calamities to the countries applying it and to the whole world. The last quarter of the twentieth century witnessed the tendency of many usury banks to establish affiliated branches that offer the Islamic banking services. This phenomenon grew and saw a high demand that made it of crucial importance, which forced a lot of the usury banks in most of the Islamic countries to reconsider entering the Islamic banking business by a way or another, either through establishing Islamic branches or opening windows that offer Islamic banking services, establishing Islamic banking trusts or others.

Because of the expansion and growth of the Islamic banking market and the increasing demand of wide categories in various communities on the Islamic banking services; the phenomenon transferred from being a local one to be a global one seeing the demand of the biggest usury banks and financial institutions in the West. The increasing importance for the demand on the Islamic banking system is owing to the success achieved by the system in providing the substitute mechanism for the interest rate (on which the usury banking system lies), which is a mechanism for sharing the profit and loss and others of the Islamic investment forms. At the beginning, the system was met by a lot of criticism and questioning by the usury banks; but the demand on it and welcoming seen by wide categories in various communities, in addition to the outstanding financial results achieved by the Islamic banks, made the usury banks themselves reconsider entering the Islamic banking business and Islamic investment by a way or another. As for the financial markets, the beginning of the twentieth century saw an increasing demand in these markets and especially in the GCC countries; as this was mainly reflected in the expansion of the stock markets and especially the equity markets. This indicates a higher awareness of the importance of the investment and development of savings. This matter effectively contributes to offering the necessary finance to establish the economic development for all the contributing communities and companies that play an important role in the economic development.

 Dr. Fahad Abdullah Al-Sherief