Adapting understanding of riba to Islamic banking: some developments

Abstract

In the post 1970s, the debate on riba has become a central concern of Muslim discourse worldwide. While partly related to global Islamic revivalism and the advocacy of movements such as the Muslim Brotherhood of Egypt and Jama'at Islami of Pakistan, discussions on riba have also been spurred on by economic development. In a number of oil-rich Muslim countries, such as the Gulf states of Saudi Arabia, United Arab Emirates, Qatar and Kuwait, the availability of billions of dollars in surplus funds in the wake of the oil price rises of the 1970s shifted earlier debates on Islamic banking from the theoretical to the practical. Parts of these surplus funds were used to create investment opportunities with the religious prohibition in mind on riba (now interpreted as interest). Given their economic importance, much consideration was given to developing banks on an interest-free basis, as well as other products and services that meet Islamic guidelines. Today, large numbers of Islamic financial institutions have been established throughout the world to cater to the needs of Muslims who are keen to follow Qur'anic guidelines on their economic behaviour. There is also theoretical and empirical research on Islamic finance to support these institutions, as well as a growing body of literature on Islamic economics.