The foundations of Islamic finance date back to the time of the Prophet Muhammad (peace be upon him) in the 7th century, with a religious mission and key values—such as the prohibition of riba (a term meaning “excess” and typically understood as usury or interest)—as prescribed in the Qur’an. While these principles were established centuries ago, they remain highly relevant today and continue to shape the evolving approaches of Shariah-compliant institutional and individual investment preferences.

In the 1960s and 70s, a handful of institutions pioneered the modern Islamic banking industry. The first Islamic bank, the Mit-Ghamr Islamic Saving Associations (MGISA), was established in Egypt in 1963. It demonstrated how commercial banking could be organized on a non-interest basis, allowing Muslims to earn returns that aligned with their faith-based values. MGISA operated on a profit-sharing model, offering depositors a share of profits instead of interest. It also provided business financing using similar profit-sharing principles. The bank experienced rapid deposit growth in its first three years before it was closed for primarily political reasons.