First Islamic Bank established in Malaysia in 1983.
1973 establishment of Islamic Development Bank. Steps for Islamization of banking & financial systems of Pakistan started in 1977-1978. Elimination of interest from operations of banks and specialized institutions like HBFC, ICP in 1979. Legal framework amended in June, 1980 to permit issuance of new interest free instrument called Participation Term Certificate (PTC). Ordinance was issued to allow establishment of mudarabah companies. Floatation of mudarabah certificates for raising risk based capital. 1991: markup and other interest bearing techniques declared unIslamic by Federal Shariah Court. Rejection of appeals in Dec.1999, directing that laws involving interest should cease by 2001. Commision for Tranformation of Financial Systems (CTFS) established in Jan, 2000.
Islamic Banking in Pakistan:
Islamic banking works under lender-borrower relationship.
Entirely depends upon fixed deposits &doesn`t borrow money from Central bank. Growth Rate in Pakistan is 50%. Share of Islamic Banks is 5%. By 2012, the share will be 12%. 353 branches of Islamic Banking Institutes in Pakistan including Al-Baraka Bank, Meezan Bank, Faisal Bank, Bank-al-Islami etc.
Functions of Islamic Banking:
Loans, Trade and Investment.
Effective allocation of resources. Constant circulation of money in the society. Promoting peace in society. Implementing rising of HALAL income.