Written by: Senad Poljo
Modern man strives for what is best for him. In the world, where he is born to be tested, he is offered two possibilities – the path of halal/permissible and the path of haram/forbidden. On the way to halal, modern man has the opportunity to get acquainted with what is called Islamic banking or as it is called in the West – ethical banking, because it is free from speculation, fraud and ambiguity. Islamic banking, or rather a financial mechanism in the time we live in, offers answers to many material needs of modern man. This confirms one great truth, which is that Islam is the entire system of human life and not only the religious part of man’s daily life, which is called worship.
Every man who claims to be a follower of Islam must harmonize all his actions and deeds in accordance with the sources of Sharia. In order for a modern man to properly understand what Islamic banking is, he needs to know its history, essence and core. The beginnings of Islamic banking date back to before the advent of the prophethood of Muhammad, peace be upon him. Namely, Muhammad peace be upon him. before Allah Almighty sent him to all mankind as a Messenger, he was engaged in trade as a Mudarib. Mudareba is a type of Islamic financial instrument that is still used today in which one party gives property and the other gives its business ability. In this case Muhammad a.s. he used his managerial skills and was very successful at it.
The development of Islamic banking in the last seven decades
In recent times, there are several stages of development of Islamic banking in the world. The period from the 1940s to the 1950s was the theoretical development of banking based on Islamic teachings. During the 1960s, the first concrete steps took place in a practical sense – in 1965, the first Islamic bank in Egypt was founded. The period of the 1970s and 1980s was a period of stronger development in conventional banking, finance, syndication and Islamic conglomerates. The period of the 1990s was the concentration of a large number of Islamic banks in certain countries. The period since 2000, the emergence of sukuk/Islamic bonds, the development of the capital market, the financing of mega projects, large Islamic commercial banks, the emergence of Islamic derivatives.
Islamic banking in BiH
When it comes to the emergence of Islamic banking in Bosnia and Herzegovina, the idea to establish the first Islamic bank appeared in the early 90’s during the then Yugoslavia, with headquarters in Sarajevo. However, this idea only found its embodiment with the establishment of Bosna Bank International (BBI).
Today, BBI Bank is a jewel in the eyes of Muslims in the world, and especially in the eyes of Muslims in Bosnia and Herzegovina.
The solution for many financial needs of modern man is offered by Islamic banking with all its products, financial instruments and material capacities. This solution was recommended from the Vatican in March 2009 by the Pope at the time of the great financial crisis. Some of the world’s major banks have opened so-called Islamic Windows to offer its customers products based on Sharia principles. Islamic banking is spreading rapidly all over the world thanks to its security, stability, trust and transparency. Every day we work on the creation of new products and business models based on the principles of Sharia that will meet the needs of modern man. It should be noted that Islamic banking is also available for non-Muslims.
Interest and Profit Margin
It is very difficult for today’s people in Bosnia and Herzegovina to understand the difference between interest and profit margin. In simple language, in today’s conventional banking, interest is money that is acquired without any effort, and according to the teachings of Islam, any business in which there is no effort and risk is not allowed. Profit margin is money that is earned through effort and risk sharing in a certain business. The Islamic bank shares with its client the profit (profit – today most often in the form of money) and the risk. Non-Islamic banks share only the profit but not the risk in business. Therefore, an Islamic bank is not of a humanitarian character like a charity, but rather a financial institution that shares profit and risk with its partners in joint projects and investments. Also, the Islamic bank has its social side through its special funds that are interest-free and humanitarian in nature.
For Muslims, Islamic banking is more than a system of commercial transactions. The Islamic banking system in today’s modern world aims to equally express the moral, ethical, social and religious dimensions in order to achieve complete equality and justice in society. This system prevents the accumulation of all property in the hands of a few people.
Getting to know and properly understanding the Islamic banking system is a step towards a better and brighter future for modern man. Proof of this is the constant and stable growth of profits, positive business and expansion of banks in today’s world that operate according to the principles of Sharia. BBI Bank has an expert team that will be happy to answer all questions and inquiries about Islamic banking in Bosnia and Herzegovina and beyond.
