12. Why did Muslim traders first develop the concept of banks?
Muslim traders first developed the concept of banks due to several factors. One of the main reasons was the prohibition of usury (interest) in Islamic law. Islamic teachings consider charging interest on loans as exploitative and unjust, as it puts the burden of debt on the borrower. Therefore, Muslim traders needed a financial system that aligned with their religious beliefs.
Additionally, the expansion of trade between different regions and cultures created a need for a reliable means of financing business transactions. Muslim traders required a system that could facilitate international trade and provide a secure place to store their wealth.
The concept of banks emerged to address these needs. They provided a platform for investment, lending, and safe storage of money without charging interest. Instead, Islamic banks operate on principles of profit sharing and risk-sharing, emphasizing ethical and responsible financial practices.
Overall, the development of banks by Muslim traders was driven by the need for a financial system that aligned with Islamic principles, facilitated trade, and provided a secure means of storing wealth.