Islamic Banking

In this brief epistle, Alahazrat proposes a four-point programme for the upliftment and recovery of Muslims. As one of the key steps, he encourages wealthy Muslims to establish Islāmic Banks and even mentions methods and workarounds [ĥīlah sharýiyyah] for avoiding interest, as described in the Islamic jurisprudential literature. Indeed, he has detailed these in his famous, Kifl al-Faqīh al-Fāhim fī Aĥkāmi Qirţās al-Darāhim, written in Makkah in 1324 AH.

Abu’l Ĥasan al-Nadawī, a Deobandī scholar, has praised this work in his Nuz’hatu’l Khawāţir:

…in his time, a scholar of his class, with such extensive knowledge of Ĥanafī fiqh, its constituents, minutiae and nuances, was rare – a testimony for which can be found in his collection of fatāwā, and his book Kifl al-Faqīh al-Fāhim fī Aĥkāmi Qirţās al-Darāhim, which he wrote in Makkah in the year 1323 AH.[1]

This would make Alahazrat among the earliest proponents in modern times, if not the first, to advocate Islamic banks but appears to have gone largely unnoticed, and is not even mentioned in bibliographies[2] on Islamic finance and economics, though names of later scholars are mentioned in most publications. For example, Abdul Ghafoor says in his book, Islamic Banking:

Interest-free banking seems to be of very recent origin. The earliest references to the reorganisation of banking on the basis of profit sharing rather than interest are found in Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in the late forties, followed by a more elaborate exposition by Mawdudi in 1950 (1961). Muhammad Hamidullah’s 1944, 1955, 1957 and 1962 writings too should be included in this category. They have all recognised the need for commercial banks and the evil of interest in that enterprise, and have proposed a banking system based on the concept of Mudarabha – profit and loss sharing.[3]

Similarly, Aĥmad Alharbi says:

Phase 1: Interest-Free Banking as an Idea

This stage began in the early 1900s and was marked by the writings of Abu’l Aala Maudud (1937), Hasan Al-Banna (1939), Hifz Al-Rahman (1942), Muhammad Hamidullah (1944), Anwar Qureshi (1946), Naiem Siddiqi (1948), and Mohammad Yousuf Al-Dean (1950).[4]

Even though the monetary contributions to the Ottoman Empire could not save it from disintegration, certain points recommended by Alahazrat, such as Islamic banking, became a reality decades after his passing away; his advice remains as relevant today, as it was in his day.

[1] Abu’l Ĥasan Álī al-Nadawī, Nuz’hatu’l Khawāţir 8/1182.

[2] See Islamic Economics: Annotated Sources in English and Urdu, compiled by Muĥammad Akram Khān, Islamic Foundation, 1983 (1403 AH).

[3] Islamic Banking by A.L.M. Abdul Gafoor (chapter 4 from the book, Interest Free Commercial Banking, 1995) URL:  http://users.bart.nl/~abdul/chap4.html#4.1.1

[4] Ahmad Alharbi, Journal of Islamic Banking and Finance, June 2015, Vol.3, No.1, p.12-15.  URL: http://dx.doi.org/10.15640/jibf.v3n1a2