Theoretical Trends of Islamic Banking: Critical Reading

Abstract

Moving away from usurious lending, in which the borrower bears the risk of the loan,
to almudaraba and participation, in which the two parties to the contract share its profits and
losses, was the title of the emerging Islamic banking, where its project and its contracting system
were prepared through individual initiatives. However, as soon as Islamic banks were
established, professional considerations began to dominate the leadership of banking practice,
specifically in the field of risk management. It led to a decisive transformation that would bring
Islamic banks back into the Indebtedness system but through financing sales. Just as this
transformation had its supporters, it also had opponents who saw in it a departure from the
established theoretical path. The matter was decided in the fatwa institutions in favor of the new
transformation, as they noted that the Murabaha sale to the person ordering the purchase
provides the requested level of security for the Islamic banks, but the matter did not stop there, as
some banks quickly prepared a contractual system that allows them to afford liquidity for
customers, as traditional banks do. This paper aims to monitor the main trends in thought parallel
to banking practice and to estimate the doctrinal frameworks and mechanisms by which funds
are supplied to Islamic banks from the audience of financiers, and the frameworks and
mechanisms by which these funds are invested with the relevant parties. Its approach to this is
the critical extrapolation of jurisprudential consideration evolution and banking thought regarding banking practice over half a century. The research proposes a theoretical review that
could establish new corrective paths.