Summit News

TIMELINE: Milestones in rise of Islamic finance

(For other news from the Reuters Islamic Banking Summit, clickhere

) (Reuters) - Islamic finance has grown to a $1 trillion industry, after taking off in the private sector in Gulf states such as Dubai in the 1970s.

The sharia-law-compliant system, which prohibits interest, is the national norm in Sudan and Iran, and in a parallel banking system in Malaysia, Bahrain and a few other Gulf States.

Here are some key moments in the modern sector’s development:

1950s-1960s: First experimental Islamic banks develop interest-free savings and loans societies in Pakistan and the Indian subcontinent. Egypt and Malaysia see pioneering ventures in 1960s. New banks develop during the 1970s as oil money pours into Gulf states.

1975: First commercial Islamic bank opens, the Dubai Islamic Bank ( Close to 30 such banks set up over the next decade.

In October 1975, the umbrella Islamic financing institution, the Islamic Development Bank ( opens in Jeddah, Saudi Arabia. Between 1975 and 2005 it funds more than $50 billion worth of projects in Organization of the Islamic Conference (OIC) member countries.

1979: Pakistan becomes first nation to “Islamize” banking practices at state level. Process continues until 1985.

July 1983: Malaysia opens its first official sharia-compliant bank, Bank Islam Malaysia. Other banks also offer Islamic products and are supervised by the central bank, which is advised by a board of sharia scholars.

Sept: Sudan reforms banking system on Islamic principles after President Jaafar al-Numeiri establishes sharia law. Dual banking system develops, Islamic in the north, conventional in the south.

March 1984: Iran switches to interest-free banking at national level after passing a 1983 Islamic Banking law that was promised in the 1979 Islamic revolution.

By 1985: Islamic financial products offered by more than 50 conventional banks around the globe. Other major banks follow by the 1990s.

Feb 26, 1990: International Islamic accounting standards Organization, the Accounting and Auditing Organization for Islamic Financial Institutions, (, established in Bahrain by the IDB.

1991: Indonesia’s first officially-sponsored Islamic bank, Bank Muamalat, established.

By 2000: About 200 Islamic financial institutions have over $8 billion in capital, over $100 billion in deposits, and manage assets worth more than $160 billion, according to economist Mohammad Nejatullah Siddiqi.

About 40 percent are in the Middle East, another 40 percent in South and Southeast Asia, and the remaining 20 percent are split between Africa, and Europe and the Americas.

2001: Malaysia’s Financial Sector Masterplan sets target for Islamic finance to make up 20 percent of finance sector by 2010. By 2009, its share of financial assets is about 17 percent.

2002: International standard setting Organization the Islamic Financial Services Board ( established in Kuala Lumpur.

2004-2008: Investor interest in Islamic finance products grows strongly amid steady rise in oil prices and petrodollars flowing through oil producing states. World oil prices peak at over $147 per barrel in mid-2008 before sliding sharply.

Sept 2004: Islamic Bank of Britain -- the country’s first sharia-compliant high street bank -- opens in London.

Nov 2006: Dubai’s main stock exchange, the Dubai Financial Market, announces it is restructuring itself into world’s first Islamic bourse.

2008: Global credit crisis and economic slowdown send conventional financial markets into steep tailpsin and have chilling effect on Islamic finance as investors avoid risk and asset prices tumble. New Islamic bond issuance falls two-thirds to a three-year low of $15.77 billion, Islamic Finance Information Service says.

Jan 2009: Singapore launches first Islamic bond program as it vies with Malaysia for market share.

Feb 2009: Indonesia, the world’s most-populous Muslim country, sells its first retail sharia-compliant bonds, or sukuk.

(Source: Reuters, Central Banks of Sudan, Malaysia, Pakistan and Iran)

Writing by Gillian Murdoch; Editing by Kim Coghill