Islamic Finance

This contribution aims at putting into historical perspective the birth and rise of Islamic banking and finance. Besides, it focuses on the interaction and reciprocal influence between nonprofit Islamic institutions and the successful and long-standing model of Western banks, the cooperative institutions, whose ethical principles and modes of operation are close to Islamic banking. After introducing the principles and distinctive features of Islamic Finance it pinpoints earlier encounters and mutual influence, particularly since the nineteenth century, between Sharia-compliant financial activities and the European model of cooperative banks. Thereafter it chronicles the main experiments in Islamic Finance and the most important Islamic banks founded in the context of expanding oil revenues in Islamic countries during the 1970s and 1980s. Finally, it offers readers an overview about the state of Islamic banking in the framework of contemporary financial globalization and the appearance within it of new financial instruments and products.