A Comparative Study of Banking in the West and in Islam

A Comparative Study of Banking in the West and in Islam, by Cheikh Abdou Khadr Soumare, traces the history of European banking from the Middle Ages until today. Beginning with the ancient origins of the institution of banking itself, Soumare describes how two schools of banking emerged: Islamic and Western. The study demonstrates how the trade practices of the Islamic world influenced European banking at its inception, and how Islam and Christendom dealt differently with their mutual prohibition of usury, with the West gradually loosening the ban while Islam maintained it into the nineteenth century. Despite this apparent handicap, commerce flourished in the Islamic world, thanks to the invention of alternative commercial techniques such as the form of investment partnership known as mudaraba, characterized by small size and decentralized decision-makingits strengthbut also a weakness in competition with the massive volume of private investment Western deposit banks could generate. The author poses the idea that perhaps a transformed version of this ancient model could resolve the paradox and open contemporary Islamic commerce to almost unlimited growth.