366 chapter nine
still relevant to contemporary life, but indeed it required innovation
in financial instruments and banking systems in order to ensure that
banks can be successfully run on an interest-free Islamic basis.
Interest-free banking
Interest-free banking was a new concept that was not taken seriously
until the middle of the twentieth century. Indeed commercial bank-
ing itself is a nineteenth century invention and the early writing on
the subject only attracted the attention of Islamic economists during
the mid twentieth century. In his “Banking without Interest”, first
published in Urdu in 1969 and in English in 1973, Siddiqui (later
to be changed to Siddiqi) discusses the banking operation from an
Islamic perspective and furnishes us with valuable information about
the contribution of those who wrote on the subject of interest-free
banking before him (Siddiqui, 1973). The subject had attracted con-
tributions in Urdu, English and Arabic. In Urdu we find two major
contributions from Syed Abul A"la al-Maududi’s “Ribà”, in 1961
and Sh. Ahmad Irshad’s “Banking Without Interest”, in 1964. In
English, Anwar Iqbal Qureshi’s, “Islam and the Theory of Interest”,
published as early as 1946, Mohammad Uzair’s “An Outline of
Interestless Banking”, in 1955, and Afzalur Rahman’s “Banking and
Insurance in Islam” in 1979 are distinguished contributions. Mahmoud
AbùSaud’s “Is it Possible to Establish Islamic Banks?”, Mohammad
Abdùllah al-Arabi’s “Contemporary Banking”, in 1965, and Isaa
Abdou’s “Banks without Interest” in 1974, are distinct pieces of work
in Arabic. The common factor among the writers is that they main-
tained that despite the foreseen difficulties, Islamic banking could be
operated on the basis of profit-and-loss-sharing, providing that the
countries’ banking laws permit. The bank as an independent party
enters into a partnership contract with the depositors who wish to
invest their deposits. Depositors unwilling to invest would keep their
deposits on demand. Further analysis and more technical discussion
and clarification of these general principles were examined in Siddiqui’s
“Banks Without Interest”. Realizing the size of the task ahead, Siddiqi
in 1973 invited Islamic economists for further discussion of the sub-
ject (Siddiqui 1973). And these discussions continued well into the
nineteen nineties.
Another important stream of writing at that early stage came from
banking academics and practitioners. Reflecting on his experience in
establishing and running the first Islamic bank in Egypt in 1963, al-