14 AN INTRODUCTION TO ISLAMIC FINANCE
Siddiqi (2006: 2) recalls conducting a survey of writings on Islamic eco-
nomics and banking in English, Arabic, and Urdu languages in the early
1970s, and makes the following observations:
Out of the items included in the bibliography only eight date before- Out of these, only two deal with the subject of interest, the
remaining dealing with distribution of wealth (2) history (2) trade
(1) and waqf (1). Of the 14 entries in the following decade only
one deals with interest, the remaining are spread over other sub-
jects. The fi rst writings on interest-free banking appear in the nine-
teen forties. Out of a total of 28 writings on Islamic economics
during this period, three are on interest-free banking. Among the
remaining, zakat and the Islamic economic system in general has
the largest number of writings. Though the writers in this period
include Ulema [scholars] trained in traditional schools, the writings
on interest-free institutions are not by them. We have 156 entries
for the nineteen-fi fties which include several writings on interest
and interest-free institutions but the writings on socialism, capital-
ism and on some other aspects of Islamic economy far outnumber
these.
A formal critique and opposition to the element of interest started in
Egypt in the late nineteenth century when Barclays Bank was established
in Cairo to raise funds for the construction of the Suez Canal. The establish-
ment of such an interest-based bank in a Muslim country attracted opposi-
tion from its inception. Further, a formal opposition to the institution of
interest can be found as early as 1903 when the payment of interest on
post offi ce savings funds was declared contrary to Islamic values, and there-
fore illegal, by Shari’ah scholars in Egypt. In India, a minority community of
Muslims in southern India took the fi rst step toward their desire to pursue
an Islamic mode of economic activities by establishing interest-free loans as
early as the 1890s. This was mainly a welfare association collecting dona-
tions and animal skins from the public to provide interest-free loans to
the poor. An interest-free credit society was also established in Hyderabad
in 1923.
During the fi rst half of the twentieth century, there were several attempts
to highlight the areas in which the emerging conventional economic system
confl icted with Islamic values. The need for an alternative economic sys-
tem conforming to the principles of Islam soon came to the fore and econ-
omists began to explore Shari’ah-compliant contracts, especially equity
partnerships. Some of the early Muslim intellectuals and jurists (fuqaha)
who made signifi cant contributions in developing alternatives based on the
tenets of Islam include Maulana Syed Abul Ala Maudoodi (Pakistan), Imam
Muhammad Baqir al-Sadr (Iraq), Anwar Iqbal Qureshi (Pakistan), Mohammad
Nejatullah Siddiqi (India), Muhammad Uzair (Saudi Arabia), Umer Chapra