Islamic Banking and Interest: A Study of the Prohibition of Riba and Its Contemporary Interpretation

By Abdullah Saeed | Go to book overview

CHAPTER ONE

DEVELOPMENT OF ISLAMIC BANKS

This chapter provides a historical background to the issue of riba and the emergence and development of Islamic banks in modern times. We first of all trace briefly the process of Islamic revivalism, identifying periods of stagnation and growth in Islamic thought. Finally, religious, political and economic factors that underlie the development of modern Islamic banking systems are identified.


Islamic revivalism

Revivalism, alternatively known as tajdīd, is a process by which the Muslim community (umma) reinvigorates its social, moral and religious fabric by a return to the fundamentals of Islam, namely the Qur'ān and the sunna of the Prophet. The Muslim community, like any other community, has had intermittent cycles of growth and decline, followed by reinvigoration by means of internal moral-social reform.1 However, later medieval centuries generally saw a marked decline, indeed a stagnation, of intellectual life in the Muslim world.2 After the crystallisation of the classical schools of Islamic law, independent inquiry and innovation among Muslim jurists gradually declined from about the eleventh century AD. The extreme rationalism and intolerant attitudes of some Muslim jurists and philosophers created their own antithesis, a reactionary trend towards over-organisation, traditionalism, and social and legal rigidity. After the eleventh century AD, the Muslim higher education system also suffered a momentous qualitative distortion: domination of education by sectarian dogmatic theological instruction, that is, the sharī'a sciences, at the expense of natural and social sciences, or rational sciences.3 The destruction of culturally important parts of the then Muslim world by Mongols during the thirteenth century, with the resulting political anarchy and socio-cultural chaos due to the heavy losses of men of learning, engendered further social disintegration and lawlessness. According to the Indo-Pakistani philosopher poet, Muhammad Iqbal,

…for fear of further disintegration, which is only natural in such a period

1 Examples of revivalists include, al-Ghazāli (d.1111), Ibn Taymiyya (d.1328), Aḥmad
Sirhandi (d.1624), Muḥammad b. 'Abd al-Wahhāb (d.1792), and Shāh Waliullāh Dihlawi
(d.1762).

2 Rahman, Islam and Modernity, p.45.

3 Husaini, Islamic Environmental Systems, pp. 18-21.

-5-

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