Islamic Finance is a quite recent phenomenon. Even though several Islamic financial contracts were already in use during the age of the Prophet, Islamic Finance is an invention of modern times. First steps of Islamic Finance were stared in Egypt in the 1960s, and the first Islamic Bank, the Dubai Islamic Bank, was founded in 1975. Nowadays, there are more than 500 Islamic Finance institutions worldwide – their number rapidly increasing.  Alone in the last two years more than 50 new Islamic Finance providers – Islamic Banks and Islamic Insurances – have been founded. There are also conversions of traditional banks into Islamic banks, like the National Bank of Sharjah, which transformed into a full fledged Islamic Bank. Similarly, the National Commercial Bank (NCB) of Jeddah in Saudi-Arabia has turned its private client business into an Islamic Banking arm. Other conventional banks currently think about transforming themselves as well into full Islamic Finance providers.

Islamic Finance is a quite recent phenomenon. Even though several Islamic financial contracts were already in use during the age of the Prophet, Islamic Finance is an invention of modern times. First steps of Islamic Finance were stared in Egypt in the 1960s, and the first Islamic Bank, the Dubai Islamic Bank, was founded in 1975. Nowadays, there are more than 500 Islamic Finance institutions worldwide – their number rapidly increasing.  Alone in the last two years more than 50 new Islamic Finance providers – Islamic Banks and Islamic Insurances – have been founded. There are also conversions of traditional banks into Islamic banks, like the National Bank of Sharjah, which transformed into a full fledged Islamic Bank. Similarly, the National Commercial Bank (NCB) of Jeddah in Saudi-Arabia has turned its private client business into an Islamic Banking arm. Other conventional banks currently think about transforming themselves as well into full Islamic Finance providers.

As Islamic Banking is a phenomenon of modern times, there is small wonder that the market share is currently quite low. Nevertheless, as with many young businesses, market growth of Islamic Finance providers is much higher than the overall growth of the banking market. Experts assume that nowadays more than 15% of all banking business in the Muslim world is conducted via Islamic Finance – with a strong tendency to increase significantly over the coming years. An important driver of growth is the fact that Islamic Finance products and solutions are now able to compete with conventional banking products. This was not always the case in the past, as transaction structures of Islamic Finance products can be much more complex and thus expensive than structures in conventional banking. Due to market growth, more expert know how and economies of scale, Islamic Banking products now have the same performance and price as “plain vanilla” banking products, so that also price sensitive customers looking for quality and a good price buy Islamic Finance products. Interestingly, also customers who are no Muslims buy such products, due to the superior ethical standards of Islamic Banking and the good performance of Shari’ah compliant investment products.