the crisis of modernisation and islamicisation 335developing the capital market and broadening equity investment. The
conversion of the basis of operation to an interest free system, which
was exercised in phases, converted debenture financing into the
Participating Term Certificate (PTC) financing. Once more, the con-
version led to successful results with above average declared divi-
dends (ibid.). Furthermore, a new investment institution was established
in 1979 under the name of Bankers Equity Ltd., which aimed to
provide PLS finance to private sector investment in large and medium
size industrial enterprises. Further major changes were introduced in
1980: the promulgation of the Mudharabah Companies and the
Mudharabah (Floatation and Control) Ordinance, and the amend-
ment of the banking laws to allow for the opening of profit and loss
sharing accounts instead of interest based accounts.
The Establishment of Islamic Financial Institutions
The first surviving endeavor of establishing Islamic financial institutions
was the establishing of Mit-Ghamr Savings Bank in Upper Egypt in
- The pioneer of setting up the Mit-Ghamr bank was Ahmed
al-Naggar, an Egyptian academic with practical experience in local
savings banks in (West) Germany, who wanted to bring a German
experiment to the land of Nile. The Bank’s operations were based
on the Islamic principle of the profit and loss sharing with no-interest
from borrowers or depositors. The bank, however, was not referred
to as “Islamic”, in the 1960’s Nasser’s Egypt was swiftly moving to
socialism, or Arabic Socialism as President Nasser called it, with
sweeping decrees of nationalization of both foreign and major national
investments. It was difficult in these circumstances; it seems, to have
referred to the bank as being “Islamic”. Names to al-Naggar, as he
tells us, did not matter much as long as the Bank was seen to be
run on the Islamic no-interest basis (al-Naggar 1973). The philosophy
of the Bank was to mobilize local savings for the purpose of financing
small businesses and entrepreneurs; an ideology which seemed accept-
able to the ruling authority. Similar to all banks in Egypt at the
time, the Mit-Ghamr Saving bank was owned by the government,
hence regarded as a public sector institution, and was accountable
to the Ministry of Finance. But the Bank was given a degree of
operational autonomy, which was unusual by the standard of the
day. The Bank’s operations were mainly: deposit accounts, loan